It’s massive, and it’s complicated. At more than 2,000 pages, the Affordable Care Act (ACA for short) has left businesses and individuals confused about what the law contains and how it affects them.
The aim of the law is to provide affordable, quality health care for all Americans. To reach that goal, the law requires large companies to provide health insurance for their employees starting in 2015, and uninsured individuals must generally get their own health insurance starting in 2014. Those who fail to do so face penalties.
Insurance companies must also deal with new requirements. For example, they cannot refuse coverage due to pre-existing conditions, preventive services must be covered with no out-of-pocket costs, young adults can stay on parents’ policies until age 26, and lifetime dollar limits on health benefits are not permitted.
The law mandates health insurance coverage, but not every business or individual will be affected by this requirement. Here’s an overview of who will be affected.
Currently, attention is focused on the health insurance exchanges or “Marketplace” that opened for business on October 1, 2013. Confusion about the Affordable Care Act has left many people thinking everyone has to deal with the exchanges. The fact is that if you are covered by Medicare, Medicaid, or an employer-provided plan, you don’t need to do anything.
Also, if you buy your health insurance on your own and are happy with your plan, you can keep your coverage (assuming that your plan is still offered by the insurance company). However, the only way to get any premium-lowering tax credits based on your income is to buy a plan through the Marketplace.
In addition to the penalties required by the Affordable Care Act, the law made other tax changes that could affect you. Among them are the following:
The Affordable Care Act may be one of the most complicated and confusing laws ever passed, but one thing is very clear: the law will affect the taxes of most Americans. In order to manage your tax bill, you will have to factor the new health care rules into your overall personal and business tax planning. For guidance, contact our office.
NOTE: This Memo is intended to provide you with an informative summary of the tax issues connected with the Affordable Care Act. This massive package of legislation contains varying effective dates, definitions, limitations, and exceptions that cannot be summarized easily. Also be aware that in the political environment surrounding this law, changes to the law have already been made and more changes could be made at any time. For details and guidance in applying the tax provisions of this law to your situation, seek professional assistance.
The Affordable Care Act, the health care reform legislation passed in 2010, originally mandated health insurance coverage for everyone starting January 1, 2014. But the law’s complexity soon made it evident that the requirements would have to be revised. The first change was a one-year delay in the requirement that companies with 50 or more full-time employees provide “affordable, minimum essential coverage” to their employees. Another delay for employers was announced by the Treasury Department on February 10, 2014. (See details below.)
When the October 1, 2013, launch of the government website setting up an insurance Marketplace for individuals proved to be a disaster, even more changes to the law were announced. Here’s an overview of those changes.
NOVEMBER 14, 2013 – Insurance companies had cancelled a number of plans that did not meet the law’s requirements for affordable, essential coverage. People who had these plans and were happy with them objected to losing their coverage. President Obama announced that states could allow a one-year extension of these plans. Insurance regulators in many states have refused to allow the extension.
NOVEMBER 21, 2013 – Originally the deadline for signing up for insurance to be effective January 1, 2014, was December 15, 2013. On November 21, it was announced that the deadline would be extended to December 23, 2013.
DECEMBER 13, 2013 – President Obama urged insurers to be flexible in dealing with those trying to buy coverage and allow people to sign up later in January 2014 for coverage retroactive to January 1. Insurers were also asked to cover care by any doctor or hospital in January and to cover prescription refills in January regardless of policy restrictions. In response to these requests, the insurance industry said it would allow payment for January 1, 2014, coverage as late as January 10, 2014. (Some insurers extended the payment deadline to January 31, 2014.)
DECEMBER 19, 2013 – The government announced that individuals whose insurance policies were cancelled because they did not meet the ACA’s requirements would be allowed to apply for hardship exemptions from the coverage mandate for 2014. Those qualifying for the hardship exemption may go without health insurance for 2014 without paying a fine or choose bare-bones “catastrophic” coverage. Catastrophic plans were originally intended for those under age 30. These plans usually have the lowest premiums and are not eligible for federal subsidies.
DECEMBER 23, 2013 – As this deadline for buying coverage arrived, the deadline was moved again – by one day to December 24, 2015.
FEBRUARY 10, 2014 – The Treasury Department issued rules that will allow certain businesses to delay for one more year the requirement to provide minimum, affordable health insurance to their workers. Businesses with 50 to 99 employees now have until January 1, 2016, to provide health insurance for employees or face penalties. In order to qualify for this extension, employers must certify that they have not laid off employees in order to come under the 100 employee threshold. Large employers – those with 100 or more employees – must still comply with the health insurance mandate by January 1, 2015.
The complexities of the Affordable Care Act remain, and it seems very likely that additional rule changes will be made as the law’s provisions continue to roll out. We will make every effort to keep you informed about changes that could affect your tax situation.
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