What is the Affordable Care Act?

MedDebt

The Affordable Care Act (ACA) changes the rules for health insurance.  Everyone can now buy coverage.  However, the law has a tax penalty for people who do not have health insurance.

Coverage may also get cheaper.  Many people will qualify for a new tax credits.  These credits will help pay for their health insurance.  Others may qualify for free coverage.

To receive these benefits, though, you generally have to file your taxes.  That is why we at Jackson Hewitt say that April 15th is now the most important day in health care!

What’s Different About Health Insurance in 2014?

Insurers must now offer to cover you, even if you have been sick in the past.  The ACA also forces insurers to pay for your current health conditions; they can no longer exclude these.  So even if you are or have been sick, you can still get coverage.  Your will also get “first-day” coverage of all services.

Insurers can charge premiums based on your age, where you live and if you smoke.  But they can no longer charge different rates for males and females.  They also cannot charge more if you have health conditions.

The Tax Penalty for Not Getting Coverage:

Under the ACA, most people will pay a tax penalty if they do not have health coverage.  The penalties are about 1% of your income in 2014.  The penalties will go up each year.  But, you can sign up for coverage to avoid the penalty.

Making Coverage More Affordable:

The ACA makes health coverage cheaper in a few ways:

  • Medicaid Expansion: Many states have expanded Medicaid.  Up to now, Medicaid covered only people on the “five finger” test (i.e., or the aged, blind, disabled, children, pregnant/parenting adults). Now, many states will cover you if you are not on the five-finger test (for example, if you are an adult under 65 without children).  And these states will essentially use the same income limit for everyone, regardless of which “finger” you are on.  However, this varies by state.
  • Tax Credits: The federal government will provide tax credits to people who do not have affordable coverage through their jobs etc.  To qualify, an individual’s income must be between the limits for their household size.  The amount of your credit will depend on your estimated income and household size.  The government will pay these credits directly to the insurance plan that the person picks; the person enrolled will just pay his or her share of the premium to the company.  At tax time, the individual will settle up with the government to make sure that no one paid too little or too much.  However, you must buy coverage on the new marketplaces to get these credits.  Our partners at Getinsured can help with this!
  • Cost-Sharing Reductions: The federal government will also lower deductibles for some families.  Some people may see their deductibles go down by as much as 80%.  You automatically apply for this when you apply for the tax credits.

Table 2 shows who will be eligible for which program in 2014. The income limits may change slightly when the federal government updates the official poverty level.

While persons can apply for Medicaid throughout the year, individuals can only access the tax credit programs and en­roll in qualified health plans at certain times. The exchang­es will offer an initial six-month open enrollment period for 2014 between October 1, 2013 and March 31, 2014; thereafter, the open enrollment period will be October 15 to December 7 (which is consistent with that in Medicare). Individuals can enroll between open enrollment periods only if they have special qualifying events. Finally, clients will need to recertify their eligibility for tax credits each year during the open enrollment period—and they must file their taxes to continue to qualify.

Getting Covered… As Complicated as Taxes:

While the ACA does make insurance more affordable for many lower-income families, the process applying for that coverage is very complicated. The eligibility rules create a highly complex program structure, particularly for families. Different family members may qualify for different public programs, meaning that family may be “split” across different insurance companies and different hospitals and networks of doctors.

Take the example of a pregnant mother, her husband, and their six-year-old child who have a household income equivalent to 150% FPL: the mother would qualify for Med­icaid until 60 days post-partum, at which point she would transition to the premium tax credit program; the father would qualify for the premium tax credit program; the in­fant would qualify for Medicaid until age one, at which the child would transition to the Children’s Health Insurance Program (CHIP); and the six-year old child would qualify for CHIP.

In the span of just 90 days, this family could con­ceivably have three of four different insurance cards from different insurers with very different benefit designs and provider networks—and the complexity may increase if the family’s income changes after the mother gives birth.

Just like with your taxes, Jackson Hewitt is committed to helping you and your family figure out how the ACA can benefit you and what you need to do about it. We are working hard to make sure that our Tax Pros will be able to guide you through this process. Whether providing you with details about the costs and penalties associated with your health coverage or assisting you in understanding your options – you can count on your Jackson Hewitt Tax Pro to assist you to make personal decisions with greater confidence.

Understanding Gold, Silver, Bronze and Platinum Coverage:

The new health insurance marketplace in your state will sell health insurance from private health insurance companies. It is not government insurance – thought the government may help you pay for it.

Consumers on a health insurance marketplace would distinguish among levels of coverage by the four “metallic tiers” of the qualified health plans (QHPs). For example, “bronze” plans have an actuarial value of 60%, meaning that the plan pays for 60% of the covered services that an average member is likely to incur during a year, while the member pays the remaining 40% through deductibles, co-insurance, and co-payments. Thus, a bronze-level QHP may have a deduct­ible of $3,475 and patient coinsurance of 40%. The three remaining metallic tiers (i.e., silver, gold, and platinum) have higher actuarial values (i.e., 70%, 80%, and 90%, respectively). Compared to bronze plans, the plans in these other metallic tiers have lower deductibles and member cost-sharing. Additionally, special “cost-sharing reductions” are available to lower-income consumers that enroll in silver-level plans; these additional subsidies could result in deductibles as low as $200.

Bronze coverage, while comparatively less expensive, may result in other problems for consumers and providers. By way of explanation:

  1. Relatively lower bronze premiums may be attractive, but consumers will face risks.
  • Bronze plans will be less expensive than silver plans because of the underlying difference in “actuarial value” or richness of the plans. Based on a very rough calculation, bronze premiums may be about 12-16% less than silver premiums.
  • Bronze plans will have substantially larger cost-sharing for individuals than the other metallic tiers. According to an Aon Hewitt analysis funded by the Kaiser Family Foundation, bronze options are likely to include the following two options: the first would have a deductible per individual of $4,375, with consumers paying 20% of their health care expenses once meeting the deductible, and the second would have a deductible of $3,475 and patient coinsurance of 40%.9
  1. Silver plans will have lower cost-sharing, often much lower.
  • Silver options will have deductibles that are 50-80% lower than those in bronze plans at the same level of member co-insurance. For example, an Aon Hewitt analysis suggests that an individual below 200% of the federal poverty level (FPL)10 could reduce his or her deductible by more than half from $4,350 in a bronze plan to roughly $2,050—and the premium difference may be only about 17% higher for the silver-level plan. These differences in the deductibles do not reflect the additional subsidies (and lower cost-sharing) available for persons in silver-level coverage who qualify for the cost-sharing reductions.
  • The cost-sharing reductions under PPACA § 1402 would further lower cost-sharing for eligible individ­uals in silver-level plans. For example, the cost-shar­ing reductions for individuals under 200% FPL would further reduce their deductibles and other cost-sharing by 80%.11 By way of example, an individual under 200% FPL could buy a bronze product with a deductible of $4,350 (and 20% coinsurance)—or pay roughly 17% more in premium to purchase a silver-level product with a deductible of $200 (and 5% coinsurance).12
  • While consumers may use the premium tax credits to purchase coverage at any metallic tier, consumers can receive the cost-sharing subsidies only if they enroll in silver-level plans. Consequently, a consumer’s choice of a bronze-level plan rather than a silver-level plan means that they would forego the additional cost-sharing reductions that would lower their deductibles, coinsurance, and out-of-pocket maximums.
  1. Large cost sharing requirements for low income individuals with bronze coverage could leave many in­dividuals and families in debt and also have systemic effects. While individuals would pay a lower monthly premium for bronze-level coverage, they would have a much larger deductible and other cost-sharing when they seek health care services. Bronze coverage could leave low income individuals and families with medical bills that they cannot pay. These debts would, in turn, burden health care providers with larger amounts of uncompen­sated care for services for which they had anticipated payment.

Helpful Resources

  • Want to estimate how much this new coverage may cost and how big your tax credit may be? Try the Kaiser Health Subsidy Calculator
  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on premium assistance tax credits under the ACA. Read PDF.
    • Report on the individual mandate tax penalty under the ACA. Read PDF.

Families with children

Family

Health care reform makes a lot of changes that will affect your family and your taxes. Jackson Hewitt is here to help you figure out what those changes mean for your family and what you can do about them.

  • Beginning in 2014, everyone can get health coverage. You can’t be turned down, even if you’re sick.
  • Coverage will be much less expensive than it has been. Some families can even get free coverage. Others will pay a percentage of their income for coverage, and the federal government will pay the rest.
  • It will be good insurance. Private companies will offer the coverage – and it will cover most services.
  • It all starts soon. You can sign up starting October 1, 2013. The deadline for having coverage is March 31, 2014. You can sign up using the new “health insurance marketplace” in your state, which will open for business later this year. Make sure to sign up using only the official marketplace in your state.
  • What happens when life happens? Life changes have a big impact on your taxes as well as your health insurance. If your family or your income changes during the year, you can apply for and adjust your coverage under the new programs. You can do this even after March 31, 2014 if the change happens after this date.
  • Penalties in 2015: If you don’t get and keep insurance during 2014, then you may have to pay a tax penalty the next year. If you owe a penalty, you will pay it when you file your taxes in 2015, resulting in a smaller refund or larger liability.

What Should I Do Now?

  • Most of the new coverage options do not start until the end of this year. However, many children under age 19 can get free insurance right now. To find out more, visit http://finder.healthcare.gov/. If your child is under age 26 and has no health insurance you can include their coverage in your current health insurance policy during the annual open enrollment period through your employer.
  • In the meantime, the government is also still working on the details of the new health insurance programs. They will share with us those details later this year. However, the 2012 tax return you filed this year will play an important role when these programs roll out. Jackson Hewitt will be here to help you navigate this complex process!
  • Be sure to register with MyTaxManager and sign up to receive important updates and reminders related to health care and the ACA.

Helpful Resources

  • Want to estimate how much this new coverage may cost and how big your tax credit may be? Try the Kaiser Health Subsidy Calculator
  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on premium assistance tax credits under the ACA. Read PDF.
    • Report on the individual mandate tax penalty under the ACA. Read PDF.

Adults under age 65

under65

Health care reform makes a lot of changes that will affect you and your taxes. Jackson Hewitt is here to help you figure out what those changes mean for you and what you can do about them.

  • Beginning in 2014, everyone can get health coverage. You can’t be turned down, even if you’re sick.
  • Coverage will be much less expensive than it has been. Some individuals can even get free coverage. Others will pay a percentage of their income for coverage, and the federal government will pay the rest.
  • It will be good insurance. Private companies will offer the coverage – and it will cover most services.
  • It all starts soon. You can sign up starting October 1, 2013. The deadline for having coverage is March 31, 2014. You can sign up using the new “exchange” in your state, which will open for business later this year. Make sure to sign up using only the official exchange in your state.
  • What happens when life happens? Life changes have a big impact on your taxes as well as your health insurance. If you get married, have a child, or your income changes during the year, then you can apply for and adjust your coverage under the new programs. You can do this even after March 31, 2014 if the change happens after this date.
  • Penalties in 2015: If you don’t get and keep insurance during 2014, then you may have to pay a tax penalty the next year. If you owe a penalty, you will pay it when you file your taxes in 2015, resulting in a smaller refund or larger liability.

What Should I Do Now?

  • Most of the new coverage options do not start until the end of this year. The government is also still working on the details of the new health insurance programs. They will share with us those details later this year. However, the 2012 tax return you filed this year will plan an important role when these programs roll out. Jackson Hewitt will be here to help you navigate this complex process!
  • Be sure to register with MyTaxManager and sign up to receive important updates and reminders related to health care and the ACA.

Helpful Resources

  • Want to estimate how much this new coverage may cost and how big your tax credit may be? Try the Kaiser Health Subsidy Calculator
  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on premium assistance tax credits under the ACA. Read PDF.
    • Report on the individual mandate tax penalty under the ACA. Read PDF.

Hospitals

Hospitals

The ACA impacts hospitals in many different ways. Jackson Hewitt is here to help simplify the law and suggest some important issues to consider when thinking about federal health care reform.

You look at health reform from through the lens of a health care provider, employer, and as a potential enrollment site for patients:

As a healthcare provider:

  • Many lower-income patients may still be “under insured” even if they enroll in one of the tax credit programs.
  • Medicaid eligibility may not have gotten easier.It may go the other way.

As an enrollment site:

  • Consumers (patients) may face a bewildering array of decisions and choices.
  • Hospitals can use the forgiveness of medical debt as a powerful enrollment incentive. To learn more about how hospitals can turn nominal receivables into a guarantee that patients come back to their facilities with health insurance, check out this Jackson Hewitt report, Medical Debt as Enrollment Incentive (PDF).
  • Dropping coverage may make employees better off: Employers may have an incentive to drop coverage – or change the employer contribution for employee and family coverage.

Helpful Resources

  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on the large employer tax penalties under the ACA Read PDF.
    • Report on premium assistance tax credits under the ACA Read PDF.
    • Report on the individual mandate tax penalty under the ACA Read PDF.

Small Employers

Small Employers

The ACA makes a lot of changes that will affect your decisions as a small employer. Jackson Hewitt is here to help answer some important questions like: does it still make sense to offer health insurance to my employees? Do my employees still need me to offer health insurance? Or, if you do not currently offer health insurance to your employees – what can I do to help make sure my employees and their families get covered under the new insurance affordability programs like Health Insurance Marketplaces?

  • Dropping coverage may be better for employees in the long run. With the option available through the ACA, employers may have an incentive to drop coverage – or change the employer contribution for employee and family coverage.
  • Some small employers may also qualify for special tax credits under the ACA. For more detail, check out this report from the Congressional Research Service (CRS). Read PDF.

 

Helpful Resources

  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on premium assistance tax credits under the ACA Read PDF.
    • Report on the individual mandate tax penalty under the ACA Read PDF.
    • A primer on health insurance Read PDF.

Policy Makers

policyMakers

Given the close link between the ACA and the tax code, Jackson Hewitt is positioned to act as a resource to policy makers – to highlight emerging policy issues, particularly those that impact individuals, employers and enrollment activities.

The ACA embedded the new insurance affordability programs into the Internal Revenue Code – meaning that health care and tax issues are now tightly linked. Both health and tax law are hugely complex, and federal policy changes will inevitably have unexpected or counter-intuitive effects.

Jackson Hewitt applied our tax and health expertise to highlight a few of the emerging policy issues related to the ACA implementation:

  • Translating tax filing into health insurance enrollment
  • Health care providers can use the forgiveness of medical debt as a powerful enrollment incentive. To learn more about how hospitals can turn nominal receivables into a guarantee that patients come back to their facilities with health insurance, check out this Jackson Hewitt report. Read PDF.
  • Employers in states that do not expand Medicaid may face higher federal tax penalties. Read PDF.

Helpful Resources

  • Want to get technical? Check out these expert reports from the Congressional Research Service (CRS):
    • Report on premium assistance tax credits under the ACA Read PDF.
    • Report on the individual mandate tax penalty under the ACA Read PDF.
    • A primer on health insurance Read PDF.