The Affordable Care Act, popularly (and notoriously) known as Obamacare, has extended health insurance coverage to 15 million Americans who did not have it previously. One of the ways Obamacare has been able to make this new access to healthcare affordable is by providing subsidies in the form of tax credits to Americans who fall below a certain income threshold. You may be eligible to receive financial assistance in paying for your healthcare insurance plan as well. You’ll want to know how that works to know if you should take advantage of this change in the law.
There are a lot of people with very different opinions on Obamacare. But no matter what your politics may be, the one thing that we can all agree on is that health insurance in recent years has become very expensive. Prior to Obamacare there were millions of Americans who did not have health coverage because they could not afford to buy it in the private market place, and millions more whose family budgets were being crushed beneath the weight of annual premiums and medical bills. The purpose of Obamacare is to expand coverage to more Americans while making health insurance more affordable for Americans in general.
The Health Insurance Marketplace aka Exchanges
Obamacare strives to accomplish this goal by setting up searchable online marketplaces known as healthcare “exchanges” which allow consumers to compare options in a given state, (ideally bringing down prices through choice and competition) and then enabling customers to purchase the plan of their choice through advanced tax credits. It should be mentioned as well that there is a minimum level of coverage guaranteed in each plan available on the healthcare exchanges, insuring that customers get more value in terms of breadth of coverage for their investment.
Available Tax Credits
So do you qualify for a health insurance tax credit? Tax credits are available to individuals whose income level falls between two and four times the federal poverty level and who are not available for other public forms of health insurance such as Medicare and Medicaid. If this happens to describe your financial situation, then you should be eligible for a tax credit to help you purchase a health insurance plan through your state’s health insurance exchange program.
Some states operate their health insurance plans on the state level while other state’s exchanges are actually operated by the federal government, so you’ll want to get acquainted with the particular process of buying insurance through the exchange in your state.
We should also mention, however, that part of what the Affordable Care Act has done is to expand general eligibility requirements for Medicaid. Because Medicaid is a program paid for by both the federal and individual state governments, it was left to the states to decide if they would change their eligibility to include a larger swath of families. Thirty one states have chosen to expand Medicaid eligibility in some form while nineteen are not.
For those states that have expanded Medicaid, the level of income that you make while remaining eligible for coverage under the program has been increased, while the personal savings you may have accrued no longer count against you in determining your eligibility. Because eligibility for Medicaid would typically disqualify you from receiving subsidies in the healthcare exchanges, you might want to check the current qualification criteria in your state to see whether or not you currently qualify for this safety net program.
Should you not qualify for Medicaid and if you are too young to qualify for Medicare, but still have an income between 2 and 4 times the poverty level than odds are that you will quality for the health insurance tax credit. How much will it be? You can calculate your healthcare tax credit (or, if you do get coverage, your tax penalty) amount at www.healthdeals.com by going to the “health insurance cost and subsidy calculator” and inputting your age, yearly household income, and the ages of each additional family member in your home. The calculator will determine your like healthcare tax credit amount, along with the penalty amount if you don’t get coverage, and may even tell you if you are eligible for other healthcare programs.
Now unfortunately, we are currently past the open enrollment period to sign up for a healthcare plan on the exchange for 2016 (that was from November 1st 2015 to January 31st of this year). While you can take advantage of the expansion of Medicaid and enroll for that program anytime, you won’t be able to enroll for Obamacare again until the next open enrollment period for 2017.
Exceptions, however, are given to individuals with dramatic changes in family circumstances or who are getting their insurance through their employer and have to deal with employer delays. Nevertheless, looking into your insurance options in the marketplace is something that you will likely want to do for next year if getting affordable health insurance (and avoiding the tax penalty) is important to you.
How Tax Credits Work
Health insurance tax credits for 2016, as with all years, are paid out in advance to the qualifying customer in the form of reduced monthly payments on your premium. But you want to be careful and honest when calculating your credit, because if you report that will be eligible for a certain sized credit based on your income and that yearly income winds up being higher than what you reported, you will have to pay back the difference on next year’s taxes. That can definitely be a financial inconvenience for you and your family if you are not budgeting to pay extra money back to the IRS. Obviously, the point of taking advantage of the Affordable Care Act health insurance tax credit is to save you and your family money, not to wind up spending money you did not expect to.
As of about a year ago, roughly 11.5 million Americans had signed up for health insurance coverage through health insurance exchanges set up through the Affordable Care Act. About 86% of those Americans took advantage of the subsidies, or health insurance tax credits. With healthcare and its affordability being a top concern of many Americans, you definitely owe it to yourself to see if the options for getting affordable health insurance under the new healthcare law are right for you. So do yourself a favor and find out your eligibility.