NEW YORK (MainStreet) — I am "Passive & Unengaged" when it comes to healthcare, according to the U.S. Centers for Medicare and Medicaid Services, in a "psychographic segment" break-down of the uninsured American population. We are the 20.4% who are a passive and skeptical healthcare audience with better health care status. We do not use prevention and are not particularly worried about health.
To be successful and maintain costs, the Affordable Care Act (ACA) needs large healthy population segments like us plus the "Healthy & Young" (19.6%), "Informed, Healthy & Educated" (17.2%) and the Mature & Secure (11.7%) to buy in. We'd pay premiums and not really use the healthcare services to float the immediate tide of sick people with pre-existing conditions who will flood the health insurance exchanges and doctors offices nationwide in 2014 (that's the 23% "Sick, Active & Worried" and the 7.9% "Vulnerable & Unengaged" segments of the currently uninsured population.)
So will the ACA get me to enroll – is there enough incentive?
Some might say, "Hey, what about the Federal Mandate?" This part of the ACA law says I must enroll or pay a penalty in the form of an additional tax at tax time. According to the official ACA website, the 2014 penalty is the higher of 1% of your yearly income or $95 per person for the year (uninsured children are $47.50 per child). The family maximum penalty fee in 2014 is $285. The penalty will be applied as an additional tax or it will reduce any tax refund you are owed.
And, the Federal Mandate penalty will increase every year. In 2016, it will be the greater of 2.5% of income or $695 per person. That's pretty crafty, because that penalty might come close to the subsidized price of a bronze or silver plan premium depending on income and the size of the family (which is anyone with incomes as high as $45,960 for an individual and $94,200 for a family of four.)
Currently, health insurance is not about health and prevention."People buy health insurance to protect themselves from financial disaster, same as homeowners insurance, life insurance and car insurance," says Lara Cartwright-Smith, assistant research professor in the George Washington University School of Public Health and Health Services. "The uninsured have the sense that if they go to the hospital they will be taken care of...and they will, but then they will receive a bill that can financially ruin a family including the loss of their home and even bankruptcy."
I've skated by without paying healthcare insurance for myself for my husband all the 20 years we've been self-employed, but we've paid the price in fear of getting hurt or sick.
So, by 2016: pay the premium and get healthcare or pay an equal penalty and get nothing.
Well, that's enough incentive for me. My husband and I will get protection from financial ruin and a lot of preventative care we've been going without.
According to the Kaiser Family Foundation subsidy calculator I used, a bronze plan would afford me that peace of mind without busting my budget (at approximately $101.08 per month for my family of five). And since I am hardly a healthcare user, I will be paying in and helping to support the new health care system.
How to avoid the tax mandate
According to the federal website, the way to avoid the penalty is to have the minimum essential healthcare in 2014 either through the exchanges or through an employer (including COBRA) Medicaid, Medicare or a veterans' healthcare program (and some others). Some other very low-income Americans such as those who would qualify under the new income limits for Medicaid, but their state has chosen not to expand Medicaid eligibility (like my state, Florida) would be exempt from the penalty. You can still apply for an exemption (even for religious or tribal Indian reasons) in your state exchange asking not to pay a fee if you really can't afford it.
Take a subsidy in the healthcare plan premium discount or take it as a tax break?
According to an ACA tax credit brochure by Consumers Union, you can learn that you have a choice in how you want to take your subsidy discount, if you qualify for one.
You can use the subsidy to decrease your premiums. For example, here I found out that with my income and family size I could qualify to receive a government tax credit subsidy in 2014 of up to $12,345 toward the premium of a silver plan that costs $16,358 (that's $1,363 per month), thus reducing my premium to $4,013 per year (or $334 per month).
Or you can use the subsidy as a tax credit to reduce taxes you pay or get the refund. I would pay the unsubsidized premium amount $16,358 or ($1,363 per month), and then take the subsidy of $12,345 as a tax credit (reduction) in the amount of taxes to pay and use any refund to pay for your healthcare bought through the exchange.
Having a choice in this matter hinges on whether you can afford to pay the unsubsidized premium and whether or not your accountant says it would be better to take the tax credit.
Subsidy warning for those with fluctuating yearly income (or family size)
Tax caveat for the uninsured: if your family or income status changes, your subsidy qualification can change which means you are getting the wrong amount of tax credit. So, if your income goes up even a little (since we don't know the thresholds) or if you get a new job that offers health insurance, you might not be eligible for the subsidy you were previously, leaving you with a huge tax bill you didn't see coming. I am going to talk to my accountant about this since my income is highly variable and I'm going to experiment with the subsidy calculator to see the differences in making $1,000, $5,000 or $10,000 and $20,000 more per year (say if my husband becomes more than the under-employed he has been for the last three years.)
If you play around with the subsidy calculator, you may also find that being single may result in a bigger subsidy than being married. Consumers Union advises that it is your responsibility to call the Health insurance Marketplace federal number at 1-800-318-2596 if you:
- Get married or divorced
- Have a baby
- No longer claim a child on your tax return (or if a child becomes older than the allowable age 26 to be covered on your health plan)
- Get a raise
- Lose a job
- Take a salary cut
This way they can make any necessary tax credit adjustments so you won't get any tax time surprises.
What about Health Savings Accounts?
So far, it looks like Health Savings Account (HSA) plans you enrolled in during 2010 and after (so they include the ACA minimum essential benefits) will be allowed and nobody knows for sure whether there will be new HSA plans offered on the individual marketplaces. Interestingly, according to the Internal Revenue Service's new 2014 limits, HSA contribution and High Deductible Health Plan maximum out-of-pocket (MOOP) limits have risen.
- HSA contribution limit is $3,300 for an individual and:$6,550 for a family
- HAS MOOP is $6,350 for an individual and 12,700 for a family
That's interesting because the MOOP for a bronze plan based on my income and family of five on the exchange is just less than that $12,700.
So, if you have an individual HSA plan older than 2010, you should shop the exchange for a new plan. For 2014, you can still contribute to your HSA tax-free (up to the limits above) and use it for qualified healthcare expenses. But, although the ACA allows children up to age 26 coverage on your plan, if they are not dependent and you don't claim them on your taxes, then you can't use your HSA account to pay for their healthcare-related expenses.
As the healthcare exchanges open for new plan enrollment for uninsured individuals and families on October 1, we will see how the subsidies and premiums really work. Just last week, the U.S. Department of Health and Human Services (HHS) released a new report based on qualified health plans in the 36 states with exchanges run or partially-run by HHS that premiums are coming in more than 16 percent lower than projected.
--Written by Naomi Mannino for MainStreet