It seems like everyone is talking about the health care reform nowadays.There are so many terms and new concepts that can be very confusing.To help you out, we put together a list of common terms. So when someone starts talking about the Affordable Care Act, and throws out terms like “federal poverty guideline,” “Insurance Marketplaces,” even “affordable coverage” you’re picking up what they’re putting down!
Affordable Care Act (ACA) – Also known as “Obamacare” or “Health Care Reform,” the ACA is a series of laws passed by Congress and signed into law by President Obama in 2010. The official name is the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act.
Affordable coverage – Employer-sponsored insurance that is less than 9.5% of the employee’s household income.This does not include what the employee would pay for their family to be covered. Employees with affordable employee-only coverage would be ineligible for the ACA’s new premium assistance tax credits.
CHIP or Children’s Health Insurance Program – This provides free or low-cost health coverage for children up to age 19 in low-income families.In some states CHIP also covers pregnant women who are income ineligible for Medicaid but can’t afford private health insurance.CHIP is available in every state, though many states combine their CHIP and Medicaid program offerings.The income limit for CHIP varies by state.
FPL or Federal poverty guideline – The federal poverty level or guideline is the amount of income considered the poverty level and is determined by family size. This is known as 100% FPL. The Premium Tax Credit uses the most recently published guidelines when the annual open enrollment period begins. In contrast, Medicaid and CHIP use the FPL in effect at the time that the marketplace receives the application. The federal government typically updates the FPL in February of each year.
Household Income – This is the Modified Adjusted Gross Income (MAGI) for you and every individual in your family you can claim an exemption for and that is required to file a tax return.MAGI is defined differently based on what it is used for:
- The Premium Tax Credit - includes adjusted gross income (AGI) plus any excluded foreign income, any tax-exempt interest received or accrued during the year, and non-taxed Social Security benefits.
- Shared Responsibility Penalty –includes adjusted gross income (AGI) plus any excluded foreign income and tax-exempt interest received or accrued during the year.
Insurance Marketplaces – also known as Insurance Exchanges and Insurance Market Exchanges.Government-run resource for individuals, families, and small businesses to learn about health care options, compare available health care plans, choose a plan and enroll in coverage.You can apply for Medicaid, CHIP, the new tax credits and cost-sharing reductions using the new marketplaces.Taxpayers eligible for the tax credits can only use the credits to buy coverage on the new marketplaces.
Medicaid – Medicaid is a government-funded, state-run health coverage program traditionally available to children, families, pregnant women, the elderly and people with disabilities.Some states have expanded Medicaid to cover more people. Medicaid benefits and eligibility categories, income limits and asset limits vary from state to state. The Medicaid program may have a different name in various states (e.g., Medi-Cal in California and TennCare in Tennessee).
Open enrollment:The time period when eligible taxpayers can enroll in qualified health plans through the Insurance Marketplaces.The initial open enrollment period runs October 1, 2013 through March 31, 2014. Each year after it will be October 15 through December 7. Taxpayers who have a major life change such as marriage, divorce, birth of a child, change in income, loss of insurance, etc. may be able to enroll or change qualified health plans in the periods between the open enrollments.Please note that the open enrollment period applies only to the tax credits and qualified health plans. If you’re eligible for Medicaid and CHIP can generally enroll at ANY time during the year.
Premium Tax Credit (PTC) – A tax credit that goes by many names. Also known as the Premium Assistance Tax Credit and the Health Insurance Premium Credit.This is a refundable credit for uninsured taxpayers whose income is between 100% and 400% of the federal poverty level for their household. To qualify, taxpayers must not have an offer of affordable coverage that provides minimum value from an employer. They must also not be enrolled in Medicaid, Medicare, or Veteran’s Administration health programs. Taxpayers can only the claim the tax credits if they buy coverage on the new insurance marketplaces.
Shared Responsibility Payment – The penalty assessed on nonexempt taxpayers for each month they do not have minimum essential coverage beginning after December 31, 2013. Exemptions are available for taxpayers with no tax filing obligation, short coverage gaps, without access to coverage costing less than 8% of their income, religious objections to having insurance, American Indians, unauthorized immigrants, incarcerated individuals, residents of U.S. territories, persons with defined hardships, and others.
Sound like a lot to know? It is. But Jackson Hewitt has your back when it comes to how the ACA will affect your taxes.
When you file your taxes with us, we simplify the ACA process for you, taking away the work and the worry.