Affordable Care Act: Where Things Stand Now
• 300 percent to 400 percent of FPL—9.5 percent of household income
The credit can be paid in advance by having it applied to premiums (the "get it now" option). The credit amount in this case is sent directly to the insurance company. Individuals who purchased coverage through an exchange and qualify for the credit but did not opt to have it paid in this manner can claim it as a tax credit on their income tax return (the "get it later" option). Thus, the credit for 2014 will be claimed when the 2014 return is filed in 2015. The credit is fully refundable.
Medicaid is a government program that has traditionally provided health insurance for those under age 65 who are disabled, families with children, or women who are pregnant and meet income requirements. ACA extended Medicaid eligibility to individuals with income less than 138 percent of the FPL. However, in the 25 states that have not expanded Medicaid coverage to include this income threshold for eligibility, some individuals fall into a gap (some have referred to this as the Medicaid donut hole); they have too little income to obtain a tax credit but do not qualify for Medicaid.
Cost-sharing subsidies. In addition to a tax credit to help cover premiums, some individuals may qualify for assistance with paying their deductibles, co-payments, co-insurance, and out-of-pocket spending limits; this help is called cost-sharing subsidies. Cost-sharing subsidies are available for those who have a silver, gold, or platinum plan and whose household income is between 100 percent and 250 percent of the FPL. More specifically, the subsidies are:
• 100 percent to 150 percent FPL—covers 94 percent of expenses;
• 151 percent to 200 percent FPL—covers 85 percent of expenses;
• 201 percent to 250 percent FPL—covers 73 percent of expenses.
For example, an individual whose household income puts her at 200 percent of the FPL has a silver plan. Ordinarily the plan pays 70 percent of costs; the individual is responsible for 30 percent of costs. Cost-sharing subsidies change this equation. The cost-sharing subsidies aren't paid to the individual; they effectively increase the portion paid by the insurer to 73 percent. So instead of the individual being responsible for 30 percent of out-of-pocket costs, this exposure is capped at 27 percent for this individual.
Mandate for Large Employers
Companies with 50 or more full-time employees (including full-time equivalent employees) must purchase coverage for staff or pay a penalty (Code Sec. 5000A). Part-timers are taken into account in figuring whether an employer is subject to the mandate, but an employer subject to the mandate is only required to provide coverage for full-time employees. Volunteer first-responders are not treated as employees and are not counted in determining the employer mandate (Dept. of the Treasury Letter, Jan. 14, 2014; www.scribd.com/doc/198549760/Treasury-Letter-to-Senator-Warner-on-Emergency-Responders).
As a general rule, paying the penalty is less costly than providing required coverage.
The employer mandate, which had been set to take effect on Jan. 1, 2014, has been postponed by the U.S. Treasury until Jan. 1, 2015, (www.treasury.gov/connect/blog/pages/continuing-to-implement-the-aca-in-a-careful-thoughtful-manner-.aspx). Final regulations provide additional relief for employers with 50 to 99 employees; they do not have to comply until Jan. 1, 2016 (T.D. 9655, Feb. 10, 2014). However, they must file a prescribed return that they not make changes in their staffing because of ACA.
Figuring the penalty. There are different penalty amounts, depending on whether or not the employer offers coverage and other factors. If an employer does not offer coverage and at least one full-time employee obtains individual coverage using a premium tax credit, then the employer pays a penalty of $2,000 per employee for more than 30 employees (there is no penalty on the first 30 employees).