Bar News - December 13, 2013
What Lawyers Need to Know About the Affordable Care Act
By: Honey Hastings
Your client says, “I’ve been laid off. How am I going to keep my family covered by health insurance?” Another client’s biggest concern in her pending divorce is how to keep health insurance, as her spouse works for the state, and she has diabetes. Until recently, the answer to both these questions has been COBRA. Now, the answer is the Affordable Care Act (ACA).
Lawyers who advise small business owners, the self-employed, and those facing divorce need to be familiar with the ACA. Many people in these groups need affordable health insurance. The small business and self-employed categories include many lawyers, as well.
Many are predicting that COBRA continuation coverage will become a thing of the past. Why? There are several reasons: (1) The ACA has eliminated “pre-existing conditions” as a barrier to insurance on the individual and small group market; (2) policies available for individuals now provide coverage similar to employment-connected plans, including covering all preventive care, with no co-pays; and (3) for many people, such as the unemployed worker and the soon-to-be-divorced wife, tax subsidies will cover part of the premium.
The ACA takes full effect Jan. 1. Several important provisions have already taken effect, including the requirement that children may stay on family coverage to age 26.
Full implementation means that those without health coverage may purchase insurance through a Health Insurance Marketplace. Also in effect in 2014 is the requirement that most people have health insurance. However, the requirement that businesses with more than 50 full-time (30+ hours) employees provide insurance has been postponed to 2015.
The ACA requires that health plans offered in the individual and small group markets, both inside and outside of the Health Insurance Marketplace, offer a comprehensive package of items and services, known as “essential health benefits.”
Essential health benefits must include items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
Premium Tax Credits (Subsidies)
Subsidies will be available to income-qualified individuals who do not have employer-supplied coverage and, in limited circumstances, to those whose employer-supplied insurance is either too expensive or fails to cover 60 percent of expenses. Some people also qualify for help with out-of-pocket costs. Incomes qualifying for subsidies are 100-400 percent of federal poverty guidelines. The 2013 poverty guidelines for a one-person household is $11,490 a year or $221 a week; for a two-person household, it’s $15,510 a year or $298 a week.
Those with projected incomes under 100 percent of poverty level do NOT qualify for premium tax credits. Their coverage was to come from Medicaid expansion, which the US Supreme Court ruled was a state option. (New Hampshire’s decision on expanding Medicaid had not yet been made as of press time.)
Here are some examples of estimated monthly costs, by annual income, after the subsidies: (a) A single person earning $12,000, $20 a month; earning $30,000, $210 a month; earning $40,000, $318 a month; (b) Two-person family earning $16,000, $26 a month; earning $40,000, $345 a month; earning $50,000, $395 a month.
How the Premium Tax Credit Works
• The amount of the credit is based on projected income for 2014. This is important for those returning to work or moving from part-time to full-time.
• Insurance must be a “qualified health plan” obtained through the Marketplace.
• Covered individuals must NOT be eligible for other qualifying coverage, such as Medicare, Medicaid, or affordable employer-sponsored plan.
• The credit is advancable, with the government paying the insurance company the monthly amount of the credit. The individual or family pays the balance. When the individual/family files its federal income tax return, the actual premium tax is calculated.
• The credit is refundable, so families with little or no tax liability can benefit.
• If income changes during the year, the subsidy can be adjusted up or down, similar to changing tax withholding.
• Increased income during the year could result in a repayment, but any repayment is capped for those with incomes under 400 percent of federal poverty level. That is, there are limits on how much an individual or family would have to repay.
SHOP is a marketplace for small businesses. Tax credits are available. Alternatively, a small business may elect to give employees funds to spend on the individual Marketplace.
Requirement to Have Insurance
Unless an individual meets one of the tests for an exception, failure to have health insurance beginning in 2014 will result in a yearly fee collected by the IRS. For 2014, the fee is $95 per person or 1 percent of total income over $10,000 for individuals ($20,000 for families), whichever is higher. For children, the fee is $47.50 per child. The fee goes up yearly. Uninsured people must also pay all their health care costs.
Honey Hastings is a family law mediator and lawyer in Wilton. She is also an AARP-trained volunteer educator about ACA.