What is the ACA Individual Mandate Penalty?

With the Patient Protection and Affordable Care Act, or Obamacare, now fully in effect, there is a mandate that every American purchase health insurance or pay a tax as a penalty.  So what is the dollar amount of the ACA individual mandate penalty, and what exactly would need to happen to cause someone to have to pay the penalty?  Lets take a look.

Exemptions from the Individual Mandate Penalty

Not everyone without health insurance that lives in the United States will be required to pay the individual mandate penalty.  If any of the following apply, then the penalty might not be required.

  • Religious opposition to accepting health insurance benefits
  • Membership in an Indian tribe
  • Incarceration
  • Family income below the threshold for filing an income tax return
  • You pay for than 8% of your income for health insurance after employer contributions and tax credits are taken into account
  • Undocumented immigrant

If an individual does not fall into any of those categories, then having insurance from the following sources would then exempt him or her from the individual mandate penalty.

  • Medicare
  • Medicaid or CHIP
  • TRICARE
  • Employer-sponsored plan
  • Individual insurance that is at least at the Bronze level
  • Veteran’s health program
  • A grandfathered health plan that was in existence before the ACA was enacted

If someone does not have one of those types of insurance plans, then odds are he or she will be required to pay the individual mandate penalty.

How Much is the ACA Individual Mandate Penalty?

The penalty for not having health insurance will increase as the years go by.  For the first 3 years of the law’s existence, the penalty will look like this:

YearGreater of:AdultChildFamily Max
20141% of family income, or:$95$47.50$285
20152% of family income, or:$325$162.50$975
20162.5% of family income, or:$695$347.50$2,085

 

 

Some key notes:

  • Definition of income: Total income in excess of the filing threshold ($10,000 for individuals, $20,000 for families, in 2013)
  • Penalty is pro-rated by the number of months without coverage
  • A single gap of coverage of less than 3 months will not result in a penalty.  This is of importance for those enrolling in the initial Marketplace Open Enrollment.  The Open Enrollment deadline is March 31, which will start plans on either April 1 or May 1.  For those without coverage on January 1, this would result in a lack of coverage for over 3 months, and would seem to then result in an individual mandate penalty.  However, HHS has said that individuals that fall in this bucket can file a waiver to avoid the penalty.
  • The penalty cannot be greater than the national average of Bronze coverage on the exchanges
  • After 2016 the individual mandate penalty increases by the cost of living index

There are many things to consider when it comes to insuring yourself and your family.  The ACA individual mandate penalty is one of those things.

Source: Healthcare.gov

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Young and Female? The ACA is Looking for You

One of the biggest challenges so far to the Patient Protection and Affordable Care Act has been the enrollment of young people.  A key piece of the insurance puzzle is to get those with low risk of loss to help pay for the claims resulting from those with a high risk of loss.  In the world of health insurance, this means getting young, healthy people to participate.  Without enough of this population, the cost of an insurance plan will be higher than anticipated.  For the ACA’s supporters, this could be a disaster.

So to combat this potential problem, a new campaign is being launched that targets young women.  The reason?  Enroll America, the advocacy group behind the campaign believes women will be likely to enroll their male counterparts.

It is still to be determined whether the lackluster enrollment in the ACA is due to lack of information about the program and subsidies available or if people just are not interested.  Less than two months remain in the Open Enrollment period.

 

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What is a Health Insurance Exchange Notice and Why is it Important?

With the health insurance exchanges, also known as health insurance marketplaces, set to open for business on October 1, 2013, the world of health insurance is about to change dramatically.  Through these exchanges individuals will be able to purchase medical insurance by comparing plans, insurance companies, and premiums side by side on their computer screen.

One of the advantages of buying insurance through the marketplace is the possibility of obtaining a tax credit subsidy to help pay for the cost of the coverage.  However, not everyone is eligible for the subsidy.  One of the ways to not be eligible is to be offered affordable coverage with a certain level of benefits through your employer.  But how do you know if your group coverage makes you ineligible for the tax credits?  Your employer will provide you with a health insurance exchange notice.

What is the Health Insurance Exchange Notice?

The health insurance exchange notice will explain to you whether or not your coverage eliminates you from the subsidy.  Employers are required to provide this notice to existing employees by October 1, 2013 and to new employees within 14 days of employment.

There has been some confusion about possible penalties given to employers who do not comply with the requirement to provide a health insurance exchange notice.  Some reports suggested that there would be a $100 per day per employee penalty.  The Department of Labor came out later and confirmed that there would not be a penalty for lack of compliance.  Still, employees are encouraged to send the notice.

If your employer does not provide a notice, it is still important to find out if you are offered coverage that will keep you from being able to access the tax subsidy.

Why is the Health Insurance Exchange Notice Important?

The Patient Protection and Affordable Care Act requires every American to purchase health insurance or else face a tax.  Since health insurance is an expensive addition to the budgets of many people, the law allows for subsidies to help pay for the premiums.  However, if medical coverage is available through an employer, the subsidy is not available.

When an individual applies for coverage through the exchanges, the site will ask if group coverage is offered.  To be accurate in answering this question, people can rely on the health insurance exchange notice provided by their employer.

Are Model Notices Available?

Model notices are available through the Department of Labor’s website.

Model notice for employers that offer a plan

Model notice for employers that do not offer a plan

Group Coverage can be an Inexpensive Option

Even if you are not eligible for a subsidy because of employer sponsored coverage, the group coverage is still a great option.  The Affordable Care Act mandates that employers cannot charge employees more than 9.5% of their salary for coverage.  In many cases, this premium will be less expensive than coverage purchased through an exchange, even with a subsidy in place.  Therefore, not being able to get the tax credits because of available group coverage is not necessarily a bad thing.

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How to Find Health Insurance That Is Affordable Under Obamacare

Beginning on January 1, 2014, most of the provisions of the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare will go into full effect.  One of these provisions is the requirement that every American have health insurance or pay a fine.  Therefore, it is very important to find health insurance that gives you the coverage you need at a price you can afford.  But how do you do this?  Despite the controversy about the overall cost of the Affordable Care Act, there are some new ways to find affordable health insurance on an individual level.  Here are 4 ways that you can find health insurance that fits your budget and medical needs.

Reformed Group Insurance through an Employer

Obamacare has reformed the group insurance model.  While originally set to be implemented in 2014, the employer mandate to provide health insurance has been postponed until 2015.  Still, once it is put in place, you will be able to find health insurance through your employer that puts limits on what you pay for the plan and what your out of pocket limits will be.

The Affordable Care Act requires that employers with more than 50 full-time employees offer medical insurance to all of their full-time employees.  Full-time is defined as anyone who works at least 30 hours per week.  There are different calculations that go into the full-time definition, but just know that if you average 30 hours per week, you must be offered coverage.

The coverage that you are offered must have at least a 60% actuarial value, meaning that on average, for every dollar that the insurance covers, the insurance plan must pay for at least 60 cents.  One of the ways this is achieved is by limiting the individual’s out of pocket maximum.  In 2014, the limit is $6,350 and includes deductible, coinsurance, and copays.

Also, the employer cannot make an employee pay more than 9.5% of their salary to participate in the plan.  If you make $2,000 per month, the most you can pay for your insurance is $190.  Having said this, there is no cap on the cost of insurance for a dependent.

Still, with these provisions in place, you can find health insurance that is probably cheaper and better than before.

Health Insurance Marketplaces

Obamacare created health insurance marketplaces – originally called exchanges – to help people find health insurance plans quickly and efficiently online.  The marketplaces will make the search for a good plan easier than looking for individual insurance on your own.  Everything will be in one place.

While it will be interesting to see if the actual premiums of the plan are any cheaper than pre-Obamacare, some people will get help paying their premiums by way of tax credits (see here for tax credit eligibility).

If someone can find health insurance and use a tax subsidy, a good plan at a low rate will be available.

Parent’s Plan

The Affordable Care Act requires insurance companies to allow children to enroll in their parent’s insurance plan until age 26.  This is very advantageous because many times the cost to add a dependent to a plan is lower than the cost of an individual plan.  In fact, many times a new dependent can be added at no cost since some plans have one premium rate for all children on a plan.  In that case, someone under age 26 can effectively find health insurance that is free.

Medicaid

When Obamacare was passed, it required Medicaid to be expanded in every state.  This expansion will make it easier for adults to find health insurance through this government program.  The Supreme Court took away the requirement, and as a result, many states will not be expanding this coverage.

However, if you live in a state that is expanding Medicaid, check to see if you are eligible for this low cost way to care for medical needs.

Find Health Insurance at an Affordable Rate

When you try to find health insurance at an affordable rate, make sure to be patient and look at all your options.  Good coverage at a reasonable price is available.

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Self Insured Health Plans – When an Insurance Company Isn’t the Insurance Company

To those not involved in the day-to-day workings of health insurance, it all can look the same.  You pay a premium and hopefully when you have a claim, the insurance company makes their share of the payment.  But not everything is as it seems.  Many times what you think is the insurance company is nothing more than a claims payment system.  When you have problems with claims getting paid, your beef may actually be with an organization much closer to home.  You might be a member of one of many self insured health plans in the country.

What are Self Insured Health Plans?

Self insured health plans are typically used in group health insurance.  Instead of a typical plan in which a policyholder pays a monthly premium and the insurance company pays claims, in a self insured (also know as self funded) arrangement the policyholder (the employer in a group plan) contracts with a claims administrator (called a Third Party Administrator, or TPA) to only pay claims.  The employer pays a fee to the TPA to process these claims.  The employer then pays the claims, not an insurance company.  The “premium” that the employer pays is actually a funding rate that is used for budgeting and COBRA purposes.

The reason that people can be confused about who is the insurer is that nowadays most insurance companies also perform TPA functions.  This allows group insurance plans to tap into the network discounts of the insurance company.

Self insured health plans leave the employer at risk of paying more out in claims than they budgeted.  However, there is less fixed expense in a self funded plan than a fully insured plan.

You will see a self insured plan more often with large groups since it is easier to predict the future claims of a large group than a small group.

How Do Self Insured Health Plans Affect a Plan Subscriber?

If you are on a self funded plan, it is important to note that if you have an issue with a medical expense being covered, your beef is not with an insurance company.  It is with your employer.  Self insured health plans dictate to the TPA what is covered and what is not.  The TPA is then required to administer the plan the way the group wants.  Of course, group plans must still adhere to Affordable Care Act guidelines.

That doesn’t mean that the TPA doesn’t make mistakes in claims processing; that still happens occasionally.  But if you are part of a self insured plan, determining what is covered is up to your employer.

How Do I Know if I’m Part of a Self Insured Health Plan?

There really is no way of knowing for sure if your employer’s plan is self funded unless you ask.  If you are part of a large group, the odds are that the plan is self insured.

As for the actual mechanics of a self insured plan, there is no difference as far as you are concerned.  You see a doctor, pay your share of the claim, and the rest gets paid by someone else.  Just know that if a claim is excluded from the plan, you should discuss with your employer first.

Self insured health plans are good options for everyone involved.  They help keep costs of insurance down for the plan, which allows an employer to hopefully keep the cost to their employees as low as possible.  Make sure you know who to go for if you have questions about your claims.

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