Shared Responsibility Health Coverage; It's Here
By now, most of us have heard about the Affordable Care Act and the so-called "individual mandate" for nearly everyone to acquire health insurance. For tax year 2014, the individual shared responsibility provisions of the Affordable Care Act are making their first-time appearance on individual income tax returns. This is because beginning in 2014, unless you were covered by an exemption, you were required to maintain basic health insurance coverage for yourself and your dependents, or pay a penalty. For 2014, the annual individual shared responsibility payment amount is the greater of:
- 1 percent of your household income that is above your tax return filing threshold, or
- Your family's flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285 for 2014.
The maximum you pay cannot be more than the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014. Many people already have minimum essential coverage. You have minimum essential coverage if you have employer-sponsored coverage, coverage obtained through a Health Insurance Marketplace, coverage through most government-sponsored programs, as well as certain other plans. If you maintained that coverage for each month of the calendar year, you will not owe a penalty for 2014. On the other hand, if you or your dependents did not have minimum essential coverage or an exemption, you will be required to make an individual shared responsibility payment on your tax return. You may be eligible for an exemption from the requirement to maintain essential coverage if you are a member of certain religious sects, a federally recognized Indian tribe, or a healthcare sharing ministry. You may also be eligible if you are suffering a hardship, meet certain income criteria, or are uninsured for less than three consecutive months of the year. All individuals subject to the individual shared responsibility rules will use their 2014 income tax return to do one of three things:
- Report that they have minimum essential coverage;
- Show that they qualify for an exemption; or
- Make an individual shared responsibility payment
If you have minimum essential coverage for you and each dependent in your household for the entire year, all you have to do is indicate this on your tax return by checking off one box. That's it; your done! If, however, you do not have minimum essential coverage for everyone in your household for the entire year, then your tax return just became more complicated. Additional tax forms will have to be filed with your return to show exemption qualification or to compute your individual shared responsibility payment amount. As a side note, some taxpayers who have already tried to file tax returns have reported not being able to due to not having yet received the required tax information forms from the federal and/or state exchanges. This is delaying their ability to file. Also, be warned that some taxpayers who received insurance subsidies when they purchased their insurance may find that if they had more income than anticipated, they will have to repay some of that subsidy when they file their returns. Conversely, if income was lower than expected, you may qualify for additional credit on your return. After 2014, the shared responsibility health coverage rules for large employers will come into effect, imposing assessments on applicable employers if the employer does not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents). The employer may be subject to assessment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the Affordable Insurance Exchanges. These rules will become effective for the first time in 2015 and generally will apply to employers with at least 100 full-time employees, or a combination of full-time and part-time employees that is equivalent to at least 100 full-time employees. In 2016, this drops down to 50 full-time employees, or a combination of full-time and part-time employees that is the equivalent to at least 50 full-time employees. There are many other 2015 specific provisions related to the Affordable Care Act beyond the scope of this article that large employers should be taking a look at now and discussing with their tax professionals in order to avoid pitfalls down the road.
