The Affordable Care Act is slated to be the “most significant regulatory overhaul” of the healthcare system since 1965 when Medicare and Medicaid were created. The goals of the Act are as follows:
- Increase the quality and affordability of health insurance.
- Lower the uninsured rate by expanding public and private insurance coverage.
- Reduce costs of health care for individuals and the government.
At this point, most everyone should have received information from health insurance providers on the health insurance provisions of the Act. Whether you are a small business owner or an individual seeking health insurance coverage outside an employer sponsored plan, there are several dates that you need to be aware of:
October 1, 2013
Businesses with $500,000 or more in revenue and one or more employees must have sent Notice of Health Insurance Coverage and Marketplace to all employees. The purpose is to notify full-time and part-time employees whether or not the business is providing insurance to its employees. It is important to note that health insurance and payroll companies are not handling the creation of these forms. The responsibility lies with the employer. If your company is required to issue the notices then you also must provide them to any employees hired after this date. We have provided more details on this step at http://www.healthcareactnotification.com/.
Open enrollment for health insurance starts. Individuals can compare private health insurance plans on the Marketplace (health insurance exchange) and learn if they qualify for discounted or free coverage. North Carolina will be utilizing a Federal government managed Marketplace offering regulated and standardized healthcare plans.
January 1, 2014
All individuals must have health insurance or pay a tax. Coverage gaps are allowed, but only one per year for up to 3 months.
March 31, 2014
Open enrollment on the Marketplace closes for the year. The only way to get private health insurance after this date is if you have a qualifying life event like a job loss, birth or divorce.
What does the Affordable Care Act mean for individuals?
Individuals must carry some form of health insurance or pay a penalty (tax). For 2014, this is the greater of $95 per person or 1% of taxable income for 2014. The per person tax applies to the taxpayer and up to 2 additional dependents so it is capped at $285 for 2014. These taxes significantly increase from 2014 to 2016. Note that those below the poverty line or those who aren’t required to file tax returns are not subject to this tax. You are also exempt if your share of premiums would total more than 8% of your income.
What else does the Affordable Care Act mean for businesses?
Starting in 2015 employers with 50 or more full-time equivalent (FTE) employees must provide health insurance to employees or pay the Employer Shared Responsibility Payment (ESRP). Even though the mandate has been delayed, most employers must send employees the Notice of Health Insurance Coverage and Marketplace mentioned above by October 1, 2013. If any employer does not provide health insurance coverage and has over 50 employees, the ESRP will be assessed and will be $2,000 per full-time equivalent employee. Other penalties will be assessed when employers provide coverage, but it does not meet minimum requirements. The penalty related payments will not be tax deductible.
Small businesses (fewer than 50 FTEs) have access to the Small Business Health Options Program (SHOP) or they can purchase coverage on their own. Starting in 2016, SHOP will be open to businesses with 100 or fewer FTEs. Employees can enroll or decline coverage. A healthcare tax credit may be available to businesses that choose to offer healthcare coverage.
These are only a few of the highlights of the Affordable Care Act as it relates to health insurance. For more information and to explore your options visit: https://www.healthcare.gov/. Whether you are a business or individual it is important to know your options and discuss with your tax professional.