Transamerica Institute

About the Affordable Care Act

The Patient Protection and Affordable Care Act, often referred to as the Affordable Care Act, ACA or Obamacare, is a 2010 federal law establishing 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 coverage begins on January 1, 2014.  As of the new year, every American must have health insurance coverage – through individual, employer-based, or government policies – or pay a fine on their Federal income tax filing.

Most common 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 Exchanges for Individuals

On October 1, 2013, individuals can start to sign up for health insurance coverage starting January 1, 2014 through a state-by-state marketplace called an Exchange.  From October 1st to March 2014, an open enrollment period similar to other health insurance purchasing periods will allow individuals to select a plan. 

As mentioned above, individuals who have health coverage can keep their current policies.  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 State Exchange.  Individuals who do not have health coverage can sign up for government insurance through Medicaid (if they qualify based on income) or purchase it through the Exchange in their state.  There are subsidies and tax incentives available on a sliding scale for health insurance purchases in the State Exchanges.

Plans in the new State Exchanges will be offered by private health insurers, and every plan will 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 State Exchanges.  Others will qualify for free or low-cost coverage through Medicaid or the Children’s Health Insurance Program (CHIP).  By filling out one State Exchange application, an individual will be referred to the appropriate program and incentives.

Tax Credits

Tax credits will be offered to people (based on income) who purchase health coverage through the State Exchanges.  Individuals making between $11,770 and $47,080 annually, or a family of four making between $24,250 and $97,000 per year, are eligible for credits when filing their federal income taxes.  Individuals or families at the lower amounts will pay 2 percent of their income for a State Exchange plan, and those at the upper amounts 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 8% 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)  Premiums in the State Exchanges will vary by age and region within the state, but coverage cannot be denied due to preexisting 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.
  • Members of Indian Tribes are exempt.
  • People who cannot find health coverage that costs them less than 8% 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 3 months in a calendar year without triggering the fine.

Fines

For those who do not purchase health coverage for at least 9 months, the fine starts at $95 in 2014 per adult and $47.50 per child up to $285 for a family (or 1% of income, whichever is greater) in 2014. The fine increases to $325 per adult and $162.50 per child up to $975 for a family (or 2% of income, whichever is greater) in 2015.  The fine increases again to $695 per adult and $347.50 per child up to $2,085 for a family (or 2.5% of income, whichever is greater) in 2016.  After 2016, the amounts are increased by the Federal Cost of Living Adjustment.