It's that time of year again that we all love--time go wrap up Continuing Education requirements! One topic I recently delved into is the Affordable Care Act, aka "Obamacare". This is a topic that has gotten a lot of press and hype and created a lot of confusion, and I'm just as confused as anybody, so this is a good opportunity to sort out fact from fiction, and reality from hype.I'd like to summarize some of the key points from my learning experience in today's post. This is a summary and there is a lot more to this than the information presented here, so if something catches your eye, do some more research before taking it as gospel!
Under the Affordable Care Act, in 2014:
- All individuals must have minimum essential health coverage for each month, qualify for an exemption, or make a payment (penalty) when filing his or her federal income tax return.
- In 2014, the penalty is calculated in one of 2 ways--whichever is higher is the amount to pay:
- 1% of your yearly household income, with the maximum penalty being the national average premium for a "bronze" plan or
- $95 per person for the year ($47.50 for each child under 18). Maximum penalty per family is $285.
- The Marketplace, or "exchange", was set up for individuals and employers to find health coverage under ACA. Completing an application allows users to view and compare available options. See www.healthcare.gov.
- Individuals may qualify for free or low-cost coverage through the Marketplace through a premium tax credit (only available when insurance is purchased through the Marketplace). The application process will include this information including the amount of the credit you may qualify for. There are several considerations to determine eligibility and not all are included in this blog post.
- The credit can be taken immediately ("Get It Now") by having some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket, or taken as a credit when you file your tax return ("Get It Later").
- Another provision of the ACA is for additional Medicare tax if an individual's wages or other compensation exceed a certain level. The rate of the additional Medicare tax is 0.9%
- The threshold amount for each filing status is:
- Married filing jointly $250,000
- Married filing separately: $125,000
- Single: $200,000
- Head of Household (with qualifying person) $200,000
- Qualifying widow(er) with dependent child: $200,000
- Lots of possible scenarios with this provision, so check out the details if you think it will affect you.
- ACA provisions for employers:
- Employers can be Small Employers or Large Employers:
- Small Employers have fewer than 50 full-time employees or equivalents
- Large Employer have 50 or more full-time employees or equivalents
- "Equivalents" mean how many 40-hour work weeks. If you have 2 employees who each work 20 hours per week, they count as one full-time equivalent. So you can have 50 people on your payroll but if some are part-time, you can still end up with less than 50 full-time equivalents and be considered a Small Employer
- Small Employers may be eligible for credits and other benefits.
- Employers with fewer than 25 full-time equivalent employees may be eligible for a Small Business Health Care Tax Credit to help cover the cost of providing coverage.
- Employers with 50 or fewer full-time-equivalent employees may be eligible to buy coverage through the Small Business Health Options Program (SHOP). See www.HealthCare.gov.
- Small Business Health Care Tax Credit
- Eligible employer has fewer than 25 full-time equivalent employees, with an average wage of less than $50,000 per year
- For tax years 2010 through 2013, maximum credit is 35% of premiums paid (25% if employer is a tax-exempt employer, such as a charity)
- Starting in 2014, the maximum credit will increase to 50% of premiums paid (35% if employer is a tax-exempt employer)
- To be eligible for the credit, the small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
- The credit is available for two consecutive taxable years.
- Lots more details on this credit, do your research to make sure you qualify!
