Transamerica Institute

About the Affordable Care Act

The Affordable Care Act (ACA), often referred to as the Patient Protection and Affordable Care Act, ACA or Obamacare, is a 2010 federal law establishing new consumer protections for individuals with their health insurance coverage, standards for care by doctors and hospitals and an expansion of health coverage.  Most of the protections are in effect, care standards are being phased in over time, and the expansion of health coverage began on January 1, 2014.  As of this date, every American is required to have health insurance coverage – through individual, employer-based, or government policies – or pay a penalty on their federal income tax filing.

Most common major medical health insurance coverage fulfills the requirement – for example, job-based private insurance, individual private insurance, public insurance such as Medicaid, military coverage, and veterans’ coverage.

It is important to note that individuals who use Medicare are not affected by the ACA and DO NOT HAVE TO CHANGE their coverage.


State-by-State Exchanges for Individuals

As of October 1, 2013, individuals have been able to elect to purchase health insurance through a state-by-state marketplace called an Exchange. The coverage started January 1, 2014. From November 15, 2014, continuing through February 15, 2015, an open enrollment period similar to other health insurance purchasing periods will allow individuals to select a plan.

As mentioned above, individuals who use Medicare are not affected by the ACA and do not have to change their coverage. Employees with coverage can keep their employer's plan or take the money their employer pays for health insurance and shop for a different plan in the Exchange or outside the Exchange, directly from insurers. Individuals who do not have health coverage can sign up for government insurance through Medicaid (if they qualify based on income), purchase it through the Exchange in their state, or purchase it through the traditional insurance market. There are subsidies and tax incentives available on a sliding scale for health insurance purchases in the Exchanges.

As of January 1, 2014, every individual major medical plan offered inside or outside of an Exchange must cover a core set of benefits called essential health benefits. These benefits include prescription drugs, mental health, substance abuse treatment, and rehabilitative services, among others. Individuals can compare their options based on price, benefits, quality, and other important features.

Again, many people will qualify for tax incentives when purchasing private insurance coverage in the Exchanges. Others will qualify for free or low-cost coverage through Medicaid or the Children’s Health Insurance state Program (CHIP). By filling out one  Exchange application, an individual will be referred to the appropriate program to receive information about applicable incentives.

Tax Credits

Tax credits will be offered to people (based on income) who purchase health coverage through the Exchanges to offset the cost of their health coverage. Individuals making between $11,500 and $46,000 annually, or a family of four making between $23,550 and $94,200 per year, are eligible for credits when filing their federal income taxes. Individuals or families that fall within the lower income levels will pay two percent of their income for an Exchange plan, and those that fall within the upper income levels will pay 9.5 percent of their income.

Health Insurance Requirement

The requirement to purchase individual health insurance applies to anyone who has access to health coverage costing less than eight percent of their income. For comparison, in 2013, individual employees in the United States paid $1,135 on average towards the cost of an employer health insurance plan (Kaiser Family Foundation, 2013 Employer Health Benefits Survey). Health insurance premiums may vary by age, tobacco use, and region within a state, but coverage cannot be denied due to pre-existing medical conditions.

There are exemptions to the ACA’s health insurance coverage requirement for individuals:

  • Individuals who are not required to file federal income taxes are exempt. Generally, this applies to individuals earning less than $11,500 per year ($23,550 for a family of four).

  • Individuals with a legitimate religious reason for not believing in health insurance are exempt. (To qualify for an exemption, you must practice a recognized religion that is conscientiously opposed to acceptance of the benefits of any private or public insurance system such as Social Security benefits and Medicare).

  • Members of Indian Tribes are exempt.

  • People who cannot find health coverage that costs them less than eight percent of their (or their family’s) income – including an employer contribution and/or available tax credits – are exempt.

  • Individuals experiencing a general hardship or unusual circumstances – for example, a natural disaster – are exempt.

  • Individuals can be without health coverage less than three months in a calendar year without triggering the penalty.

Penalties

For those who did not purchase health coverage for at least nine months in 2014, the penalty started at $95 per adult and $47.50 per child up to $285 for a family (or one percent of income, whichever is greater). The penalty increases to $325 per adult and $162.50 per child up to $975 for a family (or two percent of income, whichever is greater) in 2015. The penalty increases again to $695 per adult and $347.50 per child up to $2,085 for a family (or two and half percent of income, whichever is greater) in 2016. After 2016, the penalty amounts will be determined by the federal Cost of Living Adjustment.