Understanding the Affordable Care Act

How healthcare change will affect you and your clients

The Affordable Care Act (also known as Obamacare) was passed in 2010. It overhauls the U.S. healthcare system and will be implemented in phases until 2018. This represents the most significant change to our healthcare laws since the passage of Medicaid and Medicare in 1965. The Act utilizes the tax code and tax return in many respects to implement its measures. January 1, 2014 marks the first major implementation of the legislation.

 
 
Six Things You Need to Know


The Affordable Care Act is hundreds of pages long, and impacts virtually every taxpayer and employer. When it takes effect on January 1, 2014, it is important that tax professionals understand the basics at the very least. While every page is important, we've broken down the most critical information for tax professionals into six must-know facts.

1    Health Care Reform Provides Affordable Insurance to the Uninsured

  • Beginning October 1, 2013, uninsured Americans can start shopping for affordable health insurance in the online health insurance marketplace.
  • Most uninsured U.S. citizens and legal residents will be required to purchase health insurance by March 31, 2014.


2    Health Care Reform Provides Expanded Coverage

  • Ability for young adults to stay on parents' plan until age 26.
  • Individuals with pre-existing conditions cannot be denied coverage.
  • Medicaid will now be offered to individuals under age 65 with income less than about $15,302 ($31,155 for a family of four).


3    You May Be Eligible for a Government Subsidy

  • Uninsured individuals who purchase health insurance through an online health insurance marketplace or exchange and have income no greater than about $94,200 for a family of four, may be eligible for a government subsidy to help pay for health insurance.
  • The subsidy will be in the form of a tax credit.
  • Unlike most tax credits, you will not have to wait to receive the credit or subsidy; it will be applied to your insurance premium when you purchase in 2014.


4    You Can Start Checking Insurance Options Before 2014

  • Beginning in October 2013, if you're uninsured or looking for more affordable insurance, you can visit your state's online health insurance marketplace to see your options.


5    You May Receive a Penalty if Not Insured by March 31, 2014

  • If you are required to purchase health insurance and have not done so by March 31, 2014, you will receive a penalty.
  • The tax penalty will be on your 2014 tax return filed in 2015.
  • The penalty in 2014 is $95 per adult, $47.50 per child, capped at $285 or 1 percent of household income depending on income, whichever is greater.
  • Each year the penalty increases.
  • By 2016, it rises to $695 per adult, $347.50 per child, capped at $2085 or 2.5 percent of household income, whichever is greater.
  • There is no penalty for a gap in coverage less than three months.


6    You May Be Exempt from the Health Care Reform Law



You may not be required to purchase insurance and will not see any changes in 2015 on your 2014 tax return with regard to the purchase of insurance if:

  • You already have health insurance through your employer, Medicare, Medicaid, or purchased on your own
  • You have income below the IRS tax-filing threshold ($9,750 if you are single)
  • You have financial hardship
  • The lowest cost plan option exceeds 8% of your income
  • You are American Indian







Key Dates to Remember


Key Dates to Remember



Important Updates

On February 10, 2014, the U.S. government delayed another element of the Affordable Care Act.  Under this latest announcement, medium-sized businesses will not be subject to the employer mandate (that requires them to provide health insurance to employees or face a penalty) until 2016.  Last July, the Obama administration delayed the employer mandate, which was originally set to take effect in 2014, until 2015.

Under the new regulations:

  • Businesses with between 50 and 99 employees will not face a penalty until 2016 for not
    offering insurance to employees.
  • For businesses with 100 or more employees, the percentage of the number of full-time
    employees that must be offered coverage has been reduced to 70% in 2015. For 2016 and
    later, employers must offer coverage to 95% of employees.
  • Beginning in 2015, employers with 50 or more full-time employees must offer health insurance coverage to their employees or face penalties.  On January 10, 2014, the U.S. Treasury Department announced that hours of volunteer firefighters and emergency medical personnel at governmental or tax-exempt organizations will not be required to be counted when determining full-time employees.
    Read More
  • On December 19, 2013, the U.S. Department of Health & Human Services announced that individuals who had their healthcare coverage cancelled will be exempt from the individual health plan mandate. These impacted individuals will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage.
    Read More
  • U.S. Department of Health & Human Services: November 27, 2013: For small businesses in states with a SHOP Marketplace that's run by the federal government, we are making changes to make sure that you can take advantage of SHOP coverage and the tax credit as soon as  possible.
    Read More
  • On July 2, 2013, the Obama Administration delayed the mandatory employer insurance and reporting requirements by one year, or until January 1, 2015. The January 1, 2014 deadline for individuals to be insured remains unchanged.

Learn More About the Affordable Care Act


Comprehensive ACA Article


Read the Article

We have written an article that explains the important aspects of the law, and will help you better understand it. High impact provisions for individuals include:

  • You need to carry insurance beginning in 2014 unless you meet an exception
  • If you can't afford health insurance, subsidies are provided
     Read the Article     

Educational ACA Webinar


Watch the Webinar

Watch a recorded webinar that provides an in-depth explanation of the Affordable Care Act's Impact on Individuals and Small Businesses. Some of the highlights include:

  • Tax credits, penalties and mandates for individuals and businesses
  • Exceptions to the mandates
  • Various options for obtaining health insurance
  • Overview of health insurance exchanges
 Watch the Webinar 







Key Terms Explained


The Affordable Care Act may contain some terminology that you and your clients are unfamiliar with. Here is a quick glossary of key terms to help make sure both you and they understand the language of the law.

>    View Key Terms

Adjusted Gross Income (AGI) — Your gross income minus specific adjustments to income. Your AGI directly influences if you're eligible to claim many tax deductions and credits available.

Affordable Care Act (ACA) — The healthcare reform law that expands access to health coverage for all Americans and introduces new protections for people who already have health insurance.

Co-insurance — The percentage you pay to cover medical expenses after your deductible has been met.

Co-payment — A fixed amount you pay for covered healthcare services at the time medical service is provided. This amount can change based on the type of service and your health insurance plan.

Deductible — The amount you owe for healthcare costs up to a certain dollar amount. After you've paid the deductible, your health insurance plan begins to pay for your healthcare services.

Department of Health and Human Services (DHHS) — The government agency responsible for protecting the health of all Americans. The DHHS is in charge of implementing some parts of the Affordable Care Act that relate to health insurance.

Essential Health Benefits — The minimum set of core benefits health insurance plans must provide under the Affordable Care Act. This includes things like emergency services, maternity and newborn care, and prescription drugs.

Federal Poverty Level (FPL) — An income level measure issued by the Department of Health and Human Services. FPL is used to determine eligibility for certain programs and benefits and will be used to determine eligibility for health insurance through the Affordable Care Act.

Health Insurance Marketplace — Starting in October 2013, Health Insurance Marketplaces will open. These marketplaces are designed to help you find health insurance that fits your family needs and budget.

Household Income — Often used as an economic indicator, household income refers to total income from all people living in a household.

Minimum Essential Coverage — Under the Affordable Care Act, most individuals will be required to maintain this type of health insurance coverage. Government-sponsored programs (like Medicare and Medicaid), employer-sponsored plans, individual market plans, grandfathered health plans and some other types of health coverage already qualify as minimum essential coverage. If you do not have minimum essential coverage in 2014, you may have to pay a tax penalty.

Out-of-Pocket Costs — Any expenses for medical care that aren't paid for by your insurance plan.

Premium — The amount paid for your health insurance for a set time period (like monthly payments or annual payments).

Premium Assistance Credit — This is a refundable tax credit available to help people purchase health insurance, who can't afford it. People or families with household incomes of up to 400% of the federal poverty level (about $40,000 for an individual and $89,000 for a family of four in 2011), who do not qualify for other health coverage may be eligible for this credit.

Qualified Health Plan — A health insurance plan that provides essential health benefits and follows established limits on cost-sharing (like deductibles and co-payments). Under the Affordable Care Act, qualified health plans will be certified by the exchange through which they are sold.

Subsidy — The amount that the government contributes to help pay for your health insurance. Under the Affordable Care Act, this subsidy, also know as the premium assistance credit, will help people who can't afford it pay for health insurance. If you qualify for a subsidy, it will go directly to your health insurance provider when you purchase insurance to lower your monthly payments or premiums.

Tax Credit — A dollar-for-dollar reduction of the income tax you owe. Credits are usually designed to encourage or reward certain types of behavior that the government considers to be good for the economy or the environment.

Tax Deduction — Tax deductions are expenses that reduce the amount of your income that can be taxed. This can include things like medical expenses that aren't covered by insurance.

Tax Penalty — Under the Affordable Care Act, anyone who is not enrolled in a health insurance program by January 1, 2014 will receive a tax penalty, except for those who are exempt. There is no penalty for a single gap in coverage of less than 3 months.







Learn More from Government Websites


Talking to your clients about the Affordable Care Act and understanding it for yourself can be a tall task — especially since the law takes effect over such a long span of time and contains so many facets. However, each phase of the law will have an impact on your business. To read government-written, in-depth articles on all aspects of the pending legislation, click on the links below.




The Affordable Care Act Simplified for Small Businesses


On January 1, 2014, the Affordable Care Act goes into effect, and most Americans will be required to have health coverage or pay a tax penalty. Businesses with more than 50 employees are required to provide insurance, but small businesses with less than 50 employees are not required to provide insurance. If small business owners choose to provide insurance, they may be eligible for tax credits. If not, businesses can still play a unique role in helping employees get coverage.



    Read Full Article    






Affordable Care Act Small Businesses Basics


On January 1, 2014, the new health care law goes into effect requiring most Americans to have health insurance.



What you need to know:

  • If you are a business owner with fewer than 50 full-time employees, you are not required to offer health insurance
  • However, employees must have health insurance or they could be hit with a tax penalty
  • Business owners have options if they want to help employees afford insurance

Q    Do all businesses have to provide health insurance?

That depends on the number of employees. If you are a small business with fewer than 50 full-time employees, you are not required to provide health care insurance under the Act, but there are tax incentives available if you do.

Due to a recent delay of the employer mandate, employers with 50 or more employees now have until 2015 (rather than 2014) to offer health insurance benefits to their employees, or risk paying a penalty of $2000 per employee, starting with the 31st employee.



Q    How do I help my employees?

Providing health insurance can help you attract the best people and keep them healthy and productive. Plus, as of January 1, 2014, it will be the law. But we know it's expensive. Good news! You have several options to help them get coverage...affordably. Learn More



Q    How does the government define a "full-time" employee?

A full-time employee is someone who works more than 30 hours per week on average.



Q    Do employees need to have health insurance?



Yes. There will be a few exemptions granted to those who:

  • Earn less than the income amount required to file taxes ($9,350 for an individual).
  • Belong to a religious group that opposes acceptance of benefits provided by a health insurance policy.
  • Belong to a health sharing ministry, or American Indian tribe.
  • Are undocumented.
  • Are incarcerated.
  • Could not find "affordable" coverage that cost less than 9.5% of their income.

Q    What happens if employees do not have insurance?

They will be subject to penalties. The 2014 penalties for not having health insurance are as follows: $95 per adult and $47.50 per child (up to $285 per family), or 1% of the annual family income, whichever is greater. The penalty is expected to go up every year until 2016.



Q    Will there be financial help available to employees who can't afford insurance?

Yes, government subsidies will be available for low and moderate-income families.



Q    Do employers have to notify their employees about the new insurance exchanges?

All companies with at least $500,000 in annual revenue and at least 1 employee must notify their employees about health coverage options, including the existence of the new insurance exchanges by October 1, 2013. Employers are required to provide notice to each employee at the time of hiring beginning October 1, 2013. For 2014, the employer can provide notice within 14 days of the employee's starting date.

Department of Labor, Technical Release No. 2013-02: http://www.dol.gov/ebsa/newsroom/tr13-02.html

Employee notification forms:
Click here for employers who offer health insurance to at least one employee
Click here  for employers who don't offer health insurance





Important Updates

On February 10, 2014, the U.S. government delayed another element of the Affordable Care Act.  Under this latest announcement, medium-sized businesses will not be subject to the employer mandate (that requires them to provide health insurance to employees or face a penalty) until 2016.  Last July, the Obama administration delayed the employer mandate, which was originally set to take effect in 2014, until 2015.

Under the new regulations:

  • Businesses with between 50 and 99 employees will not face a penalty until 2016 for not
    offering insurance to employees.
  • For businesses with 100 or more employees, the percentage of the number of full-time
    employees that must be offered coverage has been reduced to 70% in 2015. For 2016 and
    later, employers must offer coverage to 95% of employees.
  • Beginning in 2015, employers with 50 or more full-time employees must offer health insurance coverage to their employees or face penalties.  On January 10, 2014, the U.S. Treasury Department announced that hours of volunteer firefighters and emergency medical personnel at governmental or tax-exempt organizations will not be required to be counted when determining full-time employees.
    Read More
  • On December 19, 2013, the U.S. Department of Health & Human Services announced that individuals who had their healthcare coverage cancelled will be exempt from the individual health plan mandate. These impacted individuals will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage.
    Read More
  • U.S. Department of Health & Human Services: November 27, 2013: For small businesses in states with a SHOP Marketplace that's run by the federal government, we are making changes to make sure that you can take advantage of SHOP coverage and the tax credit as soon as  possible.
    Read More
  • On July 2, 2013, the Obama Administration delayed the mandatory employer insurance and reporting requirements by one year, or until January 1, 2015. The January 1, 2014 deadline for individuals to be insured remains unchanged.

Learn More About the Affordable Care Act


Comprehensive ACA Article


Read the Article

We have written an article that explains the important aspects of the law, and will help you better understand it. High impact provisions for individuals include:

  • You need to carry insurance beginning in 2014 unless you meet an exception
  • If you can't afford health insurance, subsidies are provided
     Read the Article     

Educational ACA Webinar


Watch the Webinar

Watch a recorded webinar that provides an in-depth explanation of the Affordable Care Act's Impact on Individuals and Small Businesses. Some of the highlights include:

  • Tax credits, penalties and mandates for individuals and businesses
  • Exceptions to the mandates
  • Various options for obtaining health insurance
  • Overview of health insurance exchanges
 Watch the Webinar 







Key Terms Explained


The Affordable Care Act may contain some terminology that you and your clients are unfamiliar with. Here is a quick glossary of key terms to help make sure both you and they understand the language of the law.

>    View Key Terms

Adjusted Gross Income (AGI) — Your gross income minus specific adjustments to income. Your AGI directly influences if you're eligible to claim many tax deductions and credits available.

Affordable Care Act (ACA) — The healthcare reform law that expands access to health coverage for all Americans and introduces new protections for people who already have health insurance.

Co-insurance — The percentage you pay to cover medical expenses after your deductible has been met.

Co-payment — A fixed amount you pay for covered healthcare services at the time medical service is provided. This amount can change based on the type of service and your health insurance plan.

Deductible — The amount you owe for healthcare costs up to a certain dollar amount. After you've paid the deductible, your health insurance plan begins to pay for your healthcare services.

Department of Health and Human Services (DHHS) — The government agency responsible for protecting the health of all Americans. The DHHS is in charge of implementing some parts of the Affordable Care Act that relate to health insurance.

Essential Health Benefits — The minimum set of core benefits health insurance plans must provide under the Affordable Care Act. This includes things like emergency services, maternity and newborn care, and prescription drugs.

Federal Poverty Level (FPL) — An income level measure issued by the Department of Health and Human Services. FPL is used to determine eligibility for certain programs and benefits and will be used to determine eligibility for health insurance through the Affordable Care Act.

Health Insurance Marketplace — Starting in October 2013, Health Insurance Marketplaces will open. These marketplaces are designed to help you find health insurance that fits your family needs and budget.

Household Income — Often used as an economic indicator, household income refers to total income from all people living in a household.

Minimum Essential Coverage — Under the Affordable Care Act, most individuals will be required to maintain this type of health insurance coverage. Government-sponsored programs (like Medicare and Medicaid), employer-sponsored plans, individual market plans, grandfathered health plans and some other types of health coverage already qualify as minimum essential coverage. If you do not have minimum essential coverage in 2014, you may have to pay a tax penalty.

Out-of-Pocket Costs — Any expenses for medical care that aren't paid for by your insurance plan.

Premium — The amount paid for your health insurance for a set time period (like monthly payments or annual payments).

Premium Assistance Credit — This is a refundable tax credit available to help people purchase health insurance, who can't afford it. People or families with household incomes of up to 400% of the federal poverty level (about $40,000 for an individual and $89,000 for a family of four in 2011), who do not qualify for other health coverage may be eligible for this credit.

Qualified Health Plan — A health insurance plan that provides essential health benefits and follows established limits on cost-sharing (like deductibles and co-payments). Under the Affordable Care Act, qualified health plans will be certified by the exchange through which they are sold.

Subsidy — The amount that the government contributes to help pay for your health insurance. Under the Affordable Care Act, this subsidy, also know as the premium assistance credit, will help people who can't afford it pay for health insurance. If you qualify for a subsidy, it will go directly to your health insurance provider when you purchase insurance to lower your monthly payments or premiums.

Tax Credit — A dollar-for-dollar reduction of the income tax you owe. Credits are usually designed to encourage or reward certain types of behavior that the government considers to be good for the economy or the environment.

Tax Deduction — Tax deductions are expenses that reduce the amount of your income that can be taxed. This can include things like medical expenses that aren't covered by insurance.

Tax Penalty — Under the Affordable Care Act, anyone who is not enrolled in a health insurance program by January 1, 2014 will receive a tax penalty, except for those who are exempt. There is no penalty for a single gap in coverage of less than 3 months.







Learn More from Government Websites


Talking to your clients about the Affordable Care Act and understanding it for yourself can be a tall task — especially since the law takes effect over such a long span of time and contains so many facets. However, each phase of the law will have an impact on your business. To read government-written, in-depth articles on all aspects of the pending legislation, click on the links below.








Get Help from the Intuit Accountants Community