CARL WATTS & ASSOCIATES

March 10, 2014

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2014 Health Insurance Coverage - An Update
2014 is the year to make important decisions concerning your health care coverage.  You all know by now that, starting this year, you must choose to either have basic health insurance coverage (known as minimum essential coverage) for yourself and everyone in your family for each month or go without health care coverage for some or all of the year.

If you choose to have health care coverage, qualifying coverage includes:
  • Health insurance coverage provided by your employer (including COBRA and retiree coverage),
  • Health insurance coverage you purchase through a Marketplace,
  • Medicare, Medicaid or other government-sponsored health coverage including programs for veterans, or
  • Coverage you buy directly from an insurance company.
 


An open enrollment period to get coverage for 2014 through the Marketplace began on October 1, 2013 and runs through March 31, 2014. The start of your coverage depends upon when you enroll.

When you visit the Marketplace, you can fill out one Marketplace application to learn if you can get lower costs based on your income, compare your coverage options side-by-side, and if you choose, you can enroll in health insurance coverage.

If you purchase health insurance coverage through the Marketplace, you may be eligible for financial assistance including the premium tax credit, which will help lower the out-of-pocket cost of your monthly insurance premiums. 
 
If you are eligible for the credit, you can choose to “get it now” by having some or all of the credit paid in advance.  These payments go directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014. Or you “get it later” by waiting to  get the credit when you file your 2014 tax return in 2015. If you wait to get the credit, it will either increase your refund or lower your balance due.


 
 
Be aware that your eligibility is based on your projected earnings for 2014 rather than your past earnings and only the government can make the final determination on your subsidy eligibility. If your income fluctuates or changes during the year, your eligibility for a subsidy may also change.
 


If you choose to receive the credit in advance, changes in your income or family size will affect the credit that you are eligible to receive. If the credit on your tax return you file in 2015 does not match the amount you have received in advance, you will have to repay any excess advance payment, or you may get a larger refund if you are entitled to more. It is important to tell your Marketplace about changes in your income or family size as they happen during 2014 because these changes will affect the amount of your credit.

If you choose to go without coverage or experience a gap in coverage, you may qualify for an exemption if you do not have access to affordable coverage, you have a gap of less than three consecutive months without coverage, or you qualify for one of several other exemptions.  A special hardship exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period but due to the enrollment process have a coverage gap at the beginning of 2014.
 
If you (or any of your dependents) do not maintain coverage and do not qualify for an exemption, you will need to make an individual shared responsibility payment with your return. In general, the payment amount is either a percentage of your household income or a flat dollar amount, whichever is greater. You will owe 1/12th of the annual payment for each month you (or your dependents) do not have coverage and are not exempt. The annual payment amount for 2014 is the greater of:
 
  • 1 percent of your household income that is above the tax return filing threshold for your filing status, such as Married Filing Jointly or single, or
 
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.
 

 
 
 
 
The individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in 2014. You will make the payment when you file your 2014 federal income tax return in 2015.
 
You may not be required to purchase health insurance if you:
 
  • Face financial hardships;
  • Have been uninsured for less than three months;
  • Have religious objections;
  • Are American Indian;
  • Are a prison inmate;
  • Are an undocumented immigrant.
 
 
If you enroll in a health insurance plan through the Marketplace by March 31, 2014, you won’t have to make the payment for any month before your coverage began. For example, if you enroll in a Marketplace plan on March 31 your coverage begins on May 1. If you didn’t have coverage earlier in the year, you won’t have to pay a fine for any of the previous months of 2014.

 
 
It's important to remember that someone who pays the penalty doesn't have any health insurance coverage. They still will be responsible for 100% of the cost of their medical care.

Health plans that don't meet minimum essential coverage don't qualify as coverage in 2014. If you have only these types of coverage, you may have to pay the fine. Examples include:

  • Coverage only for vision care or dental care;
  • Workers' compensation;
  • Coverage only for a specific disease or condition;
  • Plans that offer only discounts on medical services.
 


You must provide information about your health insurance coverage (or any exemption from the requirement) when you file your 2014 federal income tax return in 2015, although the IRS has not yet issued instructions.

The Form 1040 for tax year 2014, which will be drafted and finalized this fall, will include instructions on how to calculate any applicable payment under the mandate.

Here are a few more things you should consider when you get your health insurance coverage for 2014.
 
Government exchange websites are designed to provide subsidy-eligible consumers with access to plans specially qualified for purchase with a subsidy. Some major health insurance companies have opted not to sell plans through government exchanges. If you want to choose from the broadest selection and find the best match for your needs and budget, you should also consider plans available off the exchange through licensed online agents. These plans will still meet the coverage requirements of the law and keep you from having to pay a tax penalty, so long as you maintain your coverage during the year without a gap of more than three consecutive months.
 
The true cost of any health insurance plan is about more than your monthly premium alone. It’s also about how costs are shared when you actually receive medical care. Take into account your annual deductible, co-payments, and coinsurance, as well as your annual out-of-pocket maximum.
 
 
People who already had self-purchased coverage in 2013 may find that their list of network providers is different in 2014. Provider networks may have changed on January 1, and some plans limit your access to providers to help keep costs in check. Make sure that the doctors or hospitals you like best – or the ones close to your home – are preferred providers under your new health plan in 2014.
 
You can visit the Department of Health and Human Services at HealthCare.gov for more information about health insurance coverage options and the Health Insurance Marketplace, financial assistance and exemptions.
 
You can find out more about the premium tax credit, as well as other tax-related provisions of the health care law at www.IRS.gov/aca. 
 
And, of course, visit our website every week for updated information on the hottest tax subjects.
 
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