Health insurance

Why do you need health insurance? The main reason is because you are alive and can get sick or injured. The second reason used to be because it was the law. The Patient
Health Insurance

Why do you need health insurance? The main reason is because you are alive and can get sick or injured. The second reason used to be because it was the law. The Patient Protection and Affordable Health Care Act (ACA), Obamacare, was signed into law on March 23, 2010. The ACA was passed in the senate on December 24, 2009. The house passed it on March 21, 2010. The Supreme Court upheld it on June 28, 2012. President Trump overturned this burdensome law. Starting in 2019, you no longer had to have health insurance coverage nor will you be penalized for not having it. 

Remember, insurance provides protection for you. ACA changes include:

  • New health insurance benefits, rights, and protections
  • New Health Insurance Marketplaces
  • New tax credits and subsidies to help individuals and small businesses purchase health insurance
  • Expansion of Medicaid eligibility in many states
  • Improvements to Medicare
  • New mandate requiring all individuals to have health coverage
  • New mandate requiring large employers to offer health coverage

Starting in January 2014, healthcare reform required most individuals to either be covered under health insurance, or pay a tax penalty. You can obtain coverage can through employer-provided insurance, individual health insurance, Medicare, or Medicaid. The tax penalty phases in over three years and became increasingly severe. In 2014, the penalty was 1 percent of annual income or $95, whichever was greater. By 2016, the penalty was 2.5 percent of income or $695, whichever was greater. If you did not have coverage in 2014, you had to pay a tax penalty when you filed your taxes.

The total penalty for the taxable year may not exceed the national average of the annual premiums of a bronze-level health insurance plan offered through the health insurance marketplaces. The health insurance plans provided proof of coverage for their customers. There were several groups who were exempt from the requirement to obtain coverage or pay the penalty, including:

  • People who would have to pay more than 8 percent of their income for health insurance
  • People with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $27,100 for a married couple with two children)
  • People who qualify for religious exemptions
  • Undocumented immigrants
  • People who are incarcerated
  • Members of Native American tribes

If you did not have insurance and did not fit into one of these categories, then you were likely to pay a tax penalty.

Christians can also check out Medi-Share at https://mychristiancare.org/medi-share/. To quote their web site:

Medi-Share is a healthcare sharing ministry where members share each other’s medical expenses. Since 1993, Medi-Share members have shared and discounted more than $1 billion in medical bills!

Employers did not necessarily have to provide health insurance. The company size determined if the employer would pay a tax penalty for not offering health insurance.

Beginning on January 1, 2015, employers with 50 or more full-time equivalent (FTE) employees were required to provide health coverage to full-time employees or else pay a tax penalty (employer mandate). The mandate was delayed in July 2013 until 2015.

Employers who had less than 50 FTE employees were not subject to these tax penalties for not offering health insurance coverage. However, if the employer did provide health insurance they might have been eligible for tax credits.

Even with the tax penalty, many employers required to provide insurance would calculate the cost of not providing health insurance and find it was more cost-effective to offer an alternative health insurance solution, such as a defined contribution plan.

They might choose to send employees to their state health insurance exchanges. They would then provide a Health Reimbursement Arrangement (HRA) to reimburse employees for a portion of their policy.

As part of the ACA, the federal government provided discounts for health insurance to eligible individuals and families. The tax assistant program (premium tax credits) supposedly helped many people buy more affordable individual or family health insurance coverage through the new state Health Insurance Marketplaces. However, many people underestimated their income when purchasing the insurance and ended up having to repay part of the credit.

The credits were “advanced-payable”. This meant they could be applied toward your premium when you purchased health insurance coverage. In 2014, 87% of people who purchased a health plan through the Marketplace received a discount, paying only $82/month on average.

If you met certain income requirements and did not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare, then you were eligible for a premium tax credit.

If your household income was up  to 400% of the federal poverty line (FPL), the tax credits were available to you. The following chart shows, that households earning up to $46,680 for an individual in 2014, or $95,400 for a family of four, qualifie for the credit.

PREMIUM TAX CREDIT ELIGIBILITY

% of Federal Poverty Line (2014) & Income

Family Size

100%

133%

150%

200%

300%

400%

1

$11,670

$16,105

$17,505

$23,340

$35,010

$46,680

2

$15,730

$21,707

$23,595

$31,460

$47,190

$62,920

3

$19,790

$27,310

$29,685

$39,580

$59,370

$70,160

4

$23,850

$32,913

$35,775

$47,700

$71,550

$95,400

 

Insurance Premium Capped at Income Percent

 

0%-2.01%

0%-3.02%

4.02%

6.34%

9.56%

9.56%

(Chart & information are from Zane Benefits and other sources.)

The premium tax credits acted as a cap on how much you paid for health insurance. The insurance premium was capped on a sliding scale between 2% – 9.6% of income, depending on your income. For example, as the chart above shows, if you made $23,340 a year (200% FPL), the maximum amount you would pay for health insurance was 6.34% of your income which is $1,480/year ($123/month).

The premium tax credits were only available when you purchased individual or family health insurance available on your state’s Health Insurance Marketplace.

Cost Sharing Subsidies

The ACA also offered cost sharing subsidies, or cost sharing reductions (CSRs). These were discounts for lower-income families to help with out-of-pocket medical expenses.

These subsidies were designed to help individuals and families pay for their deductible, co-insurance, and co-payments. They were available in addition to the premium tax credits. This helped eligible individuals pay for their monthly health insurance premium.

These subsidies basically would allow individuals and families to pay for a standard silver plan, but get better or more benefits.

Not everyone was eligible for these subsidies. They were available to households who:

  • Had an income between 100% and 250% of the federal poverty line (FPL). This is equivalent to an individual earning $29,175 in 2014, or a family of four earning $49,475.
  • Purchased a “silver” health plan from their state’s Health Insurance Marketplace.
  • Did not have access to affordable health insurance through work or a government program.
  • Those who were members of a federally recognized tribe are also eligible for cost sharing subsidies.

The cost sharing subsidies reduced the amount a family paid for out-of-pocket expenses and were based on household income and composition.

  • A family of four whose income was between 100% and 150% of the federal poverty level ($23,850 to $35,775) would be responsible for paying 6% of covered expenses out-of-pocket – compared with the 30% without cost sharing subsidies.
  • A family with an income between 150% and 200% of the poverty level ($35,775 to $47,700) would be responsible for 13% of expenses.
  • A family with an income between 200% and 250% of the poverty level ($47,700 to $59,625) would be responsible for 27% of expenses.

Health Care Tax Credits for Small Business

Small businesses were eligible for tax assistance to purchase coverage for their employees. The credit was available to qualifying small businesses for up to two consecutive years.

The tax credit was worth up to 50% of a business’s contribution toward employees’ premium costs (up to 35% for tax-exempt employers). Small businesses with fewer than 10 employees who were paid an average of $25,000 or less had the highest tax credit. Therefore, the smaller the business, the bigger the credit.

In order to qualify for the small business healthcare tax credit, you had tomeet these three criteria:

  1. Be an employer with fewer than 25 full-time equivalent (FTE) employees, and
  2. Pay an average wage of less than $50,000 a year per employee, and
  3. Pay at least half (50%) of employee health insurance premiums (for full-time employees only).

In order to claim the credit, the small businesses would use Form 8941, Credit for Small Employer Health Insurance Premiums.

Because no one is blessed with optimal health at all times, it is better to try and find some sort of health insurance for you and your family. A large medical bill can wipeout all your savings.