Healthcare Coverage: New Rules for 2014

8/1/2013 | Written by: Karen Reed, EA

At the time of this posting there were only 152 days left before the most controversial provision of The Affordable Care Act (Obamacare) goes into effect. No matter what your political affiliation is, beginning January 1, 2014, having minimum essential healthcare coverage (minimum essential coverage) is the law.

For each month of 2014, every individual U.S. citizen, U.S. National, and resident alien, will be required to (1) have minimum essential coverage, (2) qualify for an exception from the requirement, or (3) pay a penalty tax for not having the coverage or qualifying for an exception.

Those who qualify for an exemption will be required to obtain a certificate of exemption.

What is Minimal Essential Coverage?
Minimum essential coverage includes employer-sponsored coverage and Cobra, individual health insurance coverage purchased from the Health Insurance Marketplace, Medicare Part A and Medicare Advantage, Children’s Health Insurance Program Coverage, healthcare plans administered by the government, coverage provided by the Peace Corps and the Nonappropriated Fund Health Benefit Program, coverage provide to students by universities and colleges, and other types of coverage recognized by the U.S. Department of Health and Human Services.

What are the Exceptions?
You will qualify for an exception from the requirement to obtain minimal essential coverage if your household income is below the filing requirement to file a federal tax return, you cannot afford coverage because the minimum amount you would be required to pay for premiums exceeds eight percent of your household income, or you have suffered a hardship that has been certified by the Health Insurance Marketplace.

Members of religious sects that the Social Security Administration recognizes as conscientiously opposed to accepting health insurance benefits are also exempt, along with members of federally recognized Indian tribes, members of recognized health care sharing ministries, incarcerated individuals, and aliens who are not lawfully present in the United States. In addition, individuals who were not covered for less than three consecutive months (only once during the year) may be able to qualify for an exemption.

How does one obtain a Certificate of Exemption?
Individuals will be able to apply for a Certificate of Exemption by submitting an application to the Health Insurance Marketplace.

How Much is the Penalty Tax?
The penalty will be phased in over a three-year period. It will be the greater of a flat dollar amount or a percentage of the amount that your household income exceeds the minimum income tax return filing threshold. For 2014, the penalty amount is $95 per individual or dependent (half that amount for each dependent under that age of 18), and the percentage of income over the threshold is 1%. In 2015, the amount will be $325 and the percentage 2 percent. In 2016 and later the flat amount will be $695 and the percentage 2.5%. After 2016 the flat fee amount will be indexed for inflation.