As part of our ongoing effort to break apart and better understand the two Health Care Acts signed into law in March of this year, today we are going to focus on the provision that requires all Americans to carry health insurance.
Much like most states do in requiring motorists to carry auto insurance, our government has decided that requiring all Americans to carry health insurance will serve to benefit society — first, by providing a measured and systematic mechanism for allowing everyone to receive quality health care, and second by no longer requiring those who do carry insurance to absorb the costs of those who do not in the form of higher premiums.
As with most laws that have made it through countless committees, two legislative houses, and the White House, these bills have a myriad of provisions and clarifiers, however the main points related to this element of the bills are as follows:
- Beginning in 2014, all U.S. Citizens and legal residents must maintain minimum essential health coverage or pay a penalty.
- Exemptions are made for: those whose income is below the Federal Filing Requirement, individuals who reside outside the U.S., those who are exempted for religious reasons, those who are incarcerated, and members of Indian Tribes.
- Failure to maintain coverage will result in a penalty. The penalty will be calculated as the larger of a flat dollar amount ranging from $95 per person ($285 per family) in 2014 to $695 per person ($2085 per family) in 2016 ~OR~ a percentage (1% in 2014 rising to 2.5% in 2016) of total income above the Federal Filing Requirement.
- In an effort to keep insurance affordable, individuals who make less than 400% of the Federal Poverty Threshold (currently approximately $43K for a single individual, and $88K for a family of four), will be entitled to a Refundable Tax Credit for some or all of their Health Insurance Premiums.
There are, of course, additional provisions, but the above should serve to provide a basic outline of the obligations — and opportunities — provided by these bills.
If you have any questions about how the above may impact your personal situation, feel free to ask!
Until next time…….
Steven E. Clem, your Tax & Money Coach