The Patient Protection and Affordable Care Act (ACA) – What You Need to Know

Earn It! Keep It! Save It!

December 2014

HHS & Role of the Health Insurance Marketplace

 HHS: Administers the Marketplace and advance payments of PTC and other financial assistance  Marketplace: Health Insurance options, purchases & financial assistance  HealthCare.gov has more information 2

The Individual Shared Responsibility Provision

What is the Individual Shared Responsibility Provision?

Starting in 2014, everyone must either:

Have Minimum Essential Coverage (MEC)*

OR

Have a Coverage Exemption

OR

Make a Shared Responsibility Payment

*Minimum essential coverage must be maintained each month each month

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What Information Documents will an Individual Receive?

 Starting with 2014 tax year: • Form 1095-A, Health Insurance Marketplace Statement  Starting with 2015 tax year: • Form 1095-B, Health Coverage • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage 5

What is Minimum Essential Coverage?

 Employer-sponsored plans, including COBRA and retiree coverage  Coverage purchased in individual market and the new Marketplace  Coverage under specified government sponsored programs 6

Reporting MEC All Year

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What Qualifies as an Exemption?

Exemptions from coverage requirements:

 Member of a: • Recognized religious sect conscientiously opposed to accepting insurance benefits • Health care sharing ministry • Federally recognized Indian tribe  No filing requirement  Short coverage gap (< 3 months) 8

Additional Exemptions

 Hardship (Defined by HHS)  No affordable coverage ( > 8% HHI)  Incarceration  Not lawfully present in U.S.

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Getting an Exemption

 Obtained from Marketplace or IRS depending upon the type of exemption  Exemptions from the Marketplace need to be obtained at the earliest opportunity  Exemptions from the IRS can be obtained only by filing a federal tax return with new Form 8965 10

When Would an Individual Need to Make a Payment?

A payment may be due for an individual and dependents, if they don’t have:  MEC for every month of the year, or  An exemption for the months without MEC.

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How is the Payment Calculated?

   Individual shared responsibility payment calculations are based on the greater of the percentage of income OR the flat dollar amount For families, the shared responsibility payment cannot exceed 3x the flat dollar amount Shared responsibility payment amount may not exceed an amount equal to the national average premium for bronze level qualified health plans

Greater of

Percentage income (annual)

1% of household income 2% of household Income

Flat dollar amount (annual)

$95 per adult 50% for individuals under 18 2.5% of household income 2.5% of household income $325 per adult 50% for individuals under 18 $695 per adult under 18 $695 per adult 50% for individuals

plus

an increase based on cost of living 50% for individuals under 18 12

Sample Calculation

Facts: • Single individual, no dependents, • No minimum essential coverage for any month • Does not qualify for an exemption • Household income = $40,000 /filing threshold = $10,150

Payment calculation:

• Percentage of income: $40,000 – 10,150 = $29,850, 1% x $29,850 = $298.50 • Flat dollar: $95 2014 ISRP = $298.50 ($298.50 is > $95) < the national average for bronze level coverage 13

Sample Calculation Facts:

• Married w/two children under 18 • No minimum essential coverage for any month • Does not qualify for an exemption • Household income = $70,000/filing threshold = $20,300

Payment calculation:

• Percentage of income: $70,000 – 20,300 = $49,700, 1% x $49,700 = $497 • Flat dollar: 285 = ((95 x 2) + ($95/2 x 2)) 2014 ISRP = $497 ($497 is > $285) < the national average for bronze level coverage 14

Reporting Shared Responsibility Payment

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Individual Shared Responsibility Provision Summary

 Everyone must : • Have Minimum Essential Coverage, • An Exemption, or • Make a Shared Responsibility Payment  MEC is reported on the tax return  Exemptions are reported on Form 8965 filed with the tax return  The shared responsibility payment is reported on the tax return  Payment, if due, is reported and paid with the tax return 16

The Premium Tax Credit

What is the Premium Tax Credit?

 Refundable tax credit claimed on new Form 8962 filed with Form 1040  To help eligible individuals and families pay for health insurance  Two payment options: • Get it Now – advance credit payments • Get it Later – without advance credit payments  Marketplace administers Advance Payment of PTC (APTC) 18

PTC Eligibility

You may be eligible if you meet all of the following:  buy health insurance through Marketplace  are ineligible for coverage through employer or government plan  are within certain income limits  do not file a Married Filing Separately tax return (unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations , which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit  cannot be claimed as a dependent by another person 19

2014 Income Limits Based on 2013 Federal Poverty Line (FPL)

 One Individual: $11,490 (100% FPL) - $45,960 (400% FPL)  Family of Two: $15,510 (100% FPL) - $62,040 (400% FPL)  Family of Four: $23,550 (100% FPL) - $94,200 (400% FPL) Example: Based on the 2013 FPL, a family of four could have a household income up to and including $94,200 and still be eligible for the PTC.

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Key Considerations

 Advance credit payments are optional.

 Reconciling advance credit payments is required and a tax return must be filed.

 Differences between advance credit payments and the credit are likely.

 Changes in circumstances can affect the PTC amount.

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Changes in Circumstances Can Affect the Credit

Changes in circumstances can affect: • Eligibility for the PTC - even if not previously eligible • Amount of the premium tax credit Report changes to HealthCare.gov or state marketplace website promptly

Reporting changes will help ensure receipt of the proper amount of advance payments of the premium tax credit

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Major Changes in Circumstances

 Birth or Adoption  Marriage or divorce  Increases or decreases in number of dependents  Moving to another address  Increase or decrease in your income  Gaining or losing health care coverage or eligibility  Changes in filing status Note: For additional examples of life events go to Healthcare.gov

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What Information Document Will an Individual Receive?

Form 1095-A (Health Insurance Marketplace

Statement) will be issued by the Health Insurance Marketplace • Sent by January 31 • Shows: • Documentation of coverage by month • Premiums, and • Advance payments of PTC 24

What’s on PTC Form 8962

 Annual & Monthly Contribution  PTC Claim & Reconciliation  Repayment of Excess of Advance Payment  Shared Policy Allocations  Alternative Calculation for Marriage 25

How Does Reconciliation Work?

Advance payments $4,000 Calculation of PTC - $3,000 Difference $1,000

Repayment amount = $1,000 *

*Amount from Form 8962 that would be entered on Form 1040 (may be subject to a repayment cap) Note: A tax return must be filed to reconcile advance credit payments regardless of any other filing requirement. 26

What are Repayment Caps?

36B Advance Repayment Limitations Household Income (as % of Federal Poverty Line) Less than 200% At least 200% - less than 300% At least 300% - less than 400% 400% or more Single Filing Status $300 $750 $1,250 N/A Any Other Filing Status $600 $1,500 $2,500 N/A

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Premium Tax Credit Example

28 • • • • • • • Ervin is single and had household income of $28,725 FPL for single: $11,490 – 100% $28,725/$11,490 = 250% (.0805) $28,725 x .0805 = $2,312 (Ervin’s Share) Ervin enrolled in health plan with premium of $5,000 Benchmark premium plan – $5,200 $5,200 - $2,312 = $2,888 PTC 2014 Regional Meeting - Phoenix

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Form 1040 Net PTC and Repayment of Excess Advance PTC

2014 Regional Meeting - Phoenix

Premium Tax Credit Summary

 Refundable credit for only eligible individuals  Get it Now (advance credit payments) or Get it Later (without advance credit)  Report changes in circumstances  Advance credit payments must be reconciled  Everyone who receives this credit must file a tax return  Use form 1095A, Form 8962 and Form 1040 30

ACA Intake Questions

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TaxWise Worksheet 8

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What Do Taxpayers Need?

 For all taxpayers:  Type of health insurance for themselves, their spouse, and their dependents  For taxpayers who do not have insurance for themselves, their spouse, and/or their dependents:  Income information for themselves, their spouse, and their dependents  Exemption Certificate Number of any Marketplace granted coverage exemptions for themselves, their spouse, and their dependents 33

What Do Taxpayers Need?

 For taxpayers who acquired health insurance through the Marketplace for themselves, their spouse, and/or their dependents  Form 1095-A, Health Insurance Marketplace Statement  Income information for themselves, their spouse, and their dependents Note: If a dependent on your return is covered on another taxpayer’s policy, or if someone on your policy is claimed as a dependent on another taxpayer’s return, you may need information from the other taxpayer’s return and/or Form 1095-A.

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ACA Resources

 •

VITA/TCE Materials

Publication 5157 • Publication 4012, ACA Tab 

Form 8965 and Instructions



Form 8962 and Instructions



Publication 974

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ACA Web Resources IRS.gov/ACA HealthCare.gov

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