Answers to Some Of Your Frequently Asked Questions

The new healthcare reform rules that began this year and will rollout more completely in 2014 with subsidies and penalities have generated countless questions. Here are a few that I encounter everyday from people looking to understand the health care marketplace:

Question: Who is required to have health insurance?

Answer: Starting in 2014, most U.S. citizens and lawfully present aliens will be required to have health insurance for themselves and for their dependents. There are just a few exceptions to this mandate (such as certain religious exemptions, for example). The health insurance must meet minimum essential coverage standards. That is, the primary purpose of the insurance must be to provide basic health care benefits.

Question:

Answer: You may already have health insurance through a government-sponsored health plan (such as Medicare, Medicaid, Tri-Care, or CHIP), through your employer, or from a private plan. If you do not qualify for, or have access to health insurance through one of these ways, you may purchase health insurance through a health insurance exchange. An exchange is a government-sponsored “marketplace” in which you will have access to a variety of health insurance options. If your state does not have a state-sponsored exchange, a federally-sponsored exchange will be available to you.

Question:

Answer: If you purchase health insurance through an exchange and meet certain requirements, the federal government will pay part of the cost of your monthly health insurance premium directly to the health insurance plan. You will be responsible for paying the balance of the premium to the plan. The amount of subsidy you may be eligible for depends on your income and family size.

Question:

Answer: You may qualify for a subsidy if a) you purchase insurance through a health insurance exchange and b) you meet certain income guidelines. The size of your subsidy depends on your household income and your family size. Your “family” includes you, your spouse, and your dependents. Household income: For many people, your household income will simply be your adjusted gross income (AGI) shown on your tax return. However, some things may be added to that amount, such as nontaxable social security benefits. If your child or other dependent has income, such as income from a job, that income may be included in some situations. Family size: The “family” for this purpose includes you, your spouse, and your dependents for which you claim an exemption on your return.

Question:

Answer: If you intend to purchase insurance through a health insurance exchange, you will need to have information about your income and your family. For many people, the information that the exchange will use will come directly from the 2012 tax return that is filed during the 2013 filing season.

Question:

Answer: The first open enrollment period starts October 1, 2013, and continues through March 31, 2014. You will be able to contact the exchange in one of several ways (in person, on-line, by mobile app, or by phone). One way to get information is by visiting www.newyorkstateofhealth.gov to find out what information you will need to enroll in an insurance plan on the exchange.

Question:

Answer: If you already have health insurance, you do not have to do anything. If you anticipate a change in your situation (you’re getting married, expecting a baby, changing jobs, retiring, etc.) you may want to think about whether you will continue to have health insurance coverage for all family members when the mandate goes into effect in 2014. For example, suppose you currently have health insurance through your employer but you are in the process of starting your own business before the end of 2013. You will need to consider your health insurance options after you no longer work for your employer. One of those options will be to purchase insurance through an exchange.

Question:

Answer: Household income starts with adjusted gross income (AGI) which is all of the income shown on your tax return, less all of the adjustments shown on your tax return. Income may be wages from your job, self-employment income, dividends, interest, capital gain, and anything else that is subject to income tax. Adjustments may include an IRA or HSA deduction, the self-employed health insurance deduction, and other “above-the-line” items on page 1 of your tax return. Household income also includes nontaxable social security benefits, tax-exempt interest, and some kinds of foreign earned income that isn’t taxable. Finally, if you have a dependent that must file his or her own return (say your college student with a job), the dependent’s AGI and nontaxable items will be included in household income too.

Question:

Answer: Individuals who are subject to the mandate but opt to not get health insurance may be subject to a tax penalty. The penalty is calculated on your tax return. The penalty formula is a bit complicated. It, too, depends on your income and how many people are in your family. There are exceptions to the penalty and some of these are also income based. For instance, if there just are no affordable insurance options available in your area, you may be exempt from the penalty. If you are subject to the penalty, your tax refund or balance due could be affected.