Understand Obamacare through these five popular questions covering eligibility, tax penalties and subsidies.
Question 1: Am I eligible for Obamacare?
Answer: Most of the benefits of Obamacare are available to anyone who buys health insurance.
But if you want a subsidy (advanced premium tax credit) to help pay for your health insurance, there are additional requirements, including the following. You:
- Must live in the U.S.
- Be a U.S. citizen or national, or be lawfully present in the U.S.
- Have a household income between 133% and 400% of the Federal Poverty Level (FPL).
- Cannot be currently incarcerated.
If you don’t qualify for a subsidy, you can still apply for health insurance and get all of these benefits from the Affordable Care Act:
- Medical Loss Ratio requirements and rebates.
- Preventive care services, without cost-sharing.
- More mandatory coverage for women’s health care (Pap smears, birth control, etc.).
- Children can stay on parents’ health plan until age 26.
- No lifetime dollar limits on health insurance for covered benefits.
- Applications for health insurance cannot be denied because of pre-existing conditions
Question 2: Am I required to have health insurance?
Most people will have to have major medical health insurance. If you don’t, you’ll probably have to pay a tax penalty to help offset the costs of caring for uninsured Americans.
Certain exemptions to the tax penalty may apply to you. For example, households with incomes above 400% of FPL will be exempt from paying tax penalties if insurance in their area costs more than 8% of their taxable income, after taking into account employer contributions or tax credits.
Question 3: What are the tax penalties for not having health insurance?
The tax penalties started small in 2014 but have increased over time:
- In 2014, the penalty was the greater of 1.0% of taxable income or $95 per adult and $47.50 per child (up to $285 per family)
- In 2015, the penalty is the greater of 2.0% of taxable income or $325 per adult and $162.50 per child (up to $975 per family)
- In 2016, the penalty is the greater of 2.5% of taxable income or $695 per adult and $347.50 per child (up to $2,085 per family)
- After 2016, the penalty will be increased annually based on the cost-of-living
Question 4: Can you explain how subsidies work?
If you meet residency requirements for subsidies, then your total household income has to be between 133% and 400% of the Federal Poverty Level (or FPL) in order to qualify for an “advanced premium tax credit,” or subsidy, to reduce what you pay for your health insurance.
These subsidies are set on a sliding scale so that what you spend each month is limited to a defined percentage of your income, based on the second least expensive silver-level plan available in your area.
Confused? Here is an example:
If your monthly income is 133% of FPL, you would be earning about $1,273 per month in 2013. If you wanted to buy the second least expensive silver plan available in your area, here is how that would work.
At that income level you would have to spend no more than 3% of your income – about $38 per month – to buy that second least expensive plan. The government subsidy pays the rest of your monthly premium.
As your income increases, so does your share of the cost for the monthly premium.
So, if your income rises to 400% of FPL – about $3,832 per month in 2013 – you could spend no more than 9.5% of your monthly income – about $364 – for that same plan; the second least expensive silver plan.
So, if the second least expensive silver plan available in your area costs $300 a month, and you earn 400% of FPL, you do not get a subsidy.
But if the second least expensive silver plan available in your area costs $500 a month, the government would pay the difference between the $500 plan and your $364 cap.
In that scenario you would pay $364 per month for your health insurance plan, and the value of your subsidy would be $136: $500 minus your $364 cap.
Now, if there also happened to be a bronze plan available for $400 a month, you could enroll in that plan and get the same $136 subsidy. In that case, your plan would cost you $264 per month.
Or, if you wanted a gold plan that cost $600 per month, you would – once again – apply your $136 per month subsidy and pay $464 per month for your insurance policy.
Question 5: Does the Affordable Care Act require small employers to pay a tax if they don’t offer health insurance to employees?
The answer is no. Under the Affordable Care Act, businesses with fewer than 50 full-time employees (or the equivalent in part-time workers) are not required to provide health insurance to their employees. The mandate for employers with more than 50 employees was postponed until July 2015.
Let eHealth help you find a suitable and affordable health insurance plan today.