The Patient Protection and Affordable Care Act, nicknamed “Obamacare”, went into effect on January 1st 2014. The law was designed to allow all US Citizens, (even individuals with pre‐existing medical conditions), the chance to get health insurance and to decrease the rate of uninsured people in the U.S., by making this mandate a requirement.
However the Affordable Care Act remains a work in progress and the law is constantly evolving. I have come across individuals who are still lacking the fundamental knowledge of what “Obamacare” means and what they need to do to be in compliance.
Obamacare forces US Citizens to do one of three things:
- Obtain minimum essential health insurance coverage, i.e. apply for a compliant health insurance policy (see IRS definition below).
- If you qualify for certain exemptions, you don’t have to get coverage. (Talk to your accountant about these exemptions).
- If you neither qualify for the exemptions, nor get compliant health insurance, you’ll have to pay a penalty, (read more below).
CHANGES FOR 2016
- Penalty for non‐compliance for the individual mandate will increase a lot.
- Employer mandate will go into full effect.
- Insurance companies are requesting the highest premium rate increases since Obamacare went into effect.
1. Penalty for non‐compliance for individual mandate will increase a lot.
The first big change will be most noticeable for the people who remain uninsured, as the penalty for the individual mandate will increase drastically from 2015.
In 2014, the tax payers who didn’t have health insurance were required to pay the greater of $95 or 1% of their Modified Gross Income (MAGI). In 2015 the penalty rose to the greater of $325 or 2% of MAGI. Next year, the un‐insured people can expect to pay the greater of $695 or 2.5% of MAGI. For a family that could be as much as $2,085!
Even in 2016, the penalty will still likely be half or less of the roughly $3,700 annual cost of the “Silvertier” plan. Some individuals facing the penalty are avoiding it by OWING Money to the IRS at the end of the year. Since the IRS can’t garnish wages or seize property to collect the penalty, the most they can do is to ask you to deduct it from the tax refund. But if no refund is due, the IRS has little it can do other than take you (and probably millions of other people) to court.
2. The Employer mandate will go into full effect.
Under the employer mandate, businesses must provide health insurance coverage options to their full
time employees and their children up to age 26. These options have to cover at least 60% of total
allowable medical costs. Furthermore if the cost of health insurance premiums exceeds 9.5% of a full
time employees’ MAGI, then the business is responsible for providing coverage for the difference.
In 2015, large companies with more than 100 full time employees were required to offer at least 70% of
their health insurance coverage. In 2016, they will need to increase this to 95%! Mid‐size businesses of
50‐99 full time employees will also be required to provide coverage to 95% of the qualifying employees.
Businesses with 49 or fewer full‐time employees will still be exempt from Obamacare penalties, and so
are part‐time employees working 29 hours or less per week.
3. Highest Rate Increases, since Obamacare went into effect.
One of the goals of “Affordable Care Act” is to make health insurance “affordable” for as many
Americans as possible. However in 2016, there will be some drastic premium increases. In June the
federal government released data from health insurance companies across the U.S. that were
requesting double‐digit rate increases in premiums. According to data compiled by the Washington
Examiner, which took a closer look at 37 states and Washington D.C., the number of policies with
double‐digit rate increases nearly doubled to 231 in 2016 from 121 requests in 2015. Under Obamacare
any double‐digit premium rate increases need to be explained in detail to a state’s Office of the
Insurance Commissioner for justification.
QUALIFYING (COMPLIANT) COVERAGE
“Qualifying coverage includes coverage provided by your employer, health insurance you purchase in the Health Insurance Marketplace, most government‐sponsored coverage, and coverage you purchase directly from an insurance company. However, qualifying coverage does not include coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage that only covers a specific disease or condition”. (IRS.gov website) 2016 plans and prices will be available for preview the third week of October, 2015.
IMPORTANT DATES FOR 2016 Enrollment:
November 1, 2015: Open Enrollment starts — first day you can enroll in a 2016 Marketplace plan. Coverage can start as soon as January 1, 2016.
December 15, 2015: Last day to enroll in or change plans for new coverage to start January 1, 2016.
January 1, 2016: 2016 coverage starts for those who enroll or change plans by December 15.
January 15, 2016: Last day to enroll in or change plans for new coverage to start February 1,
January 31, 2016: 2016 Open Enrollment ends. Enrollments or changes between January 16 and
January 31 take effect March 1, 2016.
‐ Do your homework before open enrollment starts November 1st 2015.
‐ Contact your accountant to discuss your personal tax situation and possible penalties, or exemptions.
‐ Speak to a professional insurance broker about your health insurance needs and what your options
To summarize, 2016 seems to be the first year where we discover exactly how “affordable” the
“Affordable Care Act” really is. One prevailing fear among insurance companies and medical providers is
that consumers will be so strained by the cost of premiums that they may not be able to afford the
actual premiums and the out‐of‐pocket costs (deductibles, co‐insurance) required by the plan.
AND REMEMBER! ‐It’s always better to have some coverage than none at all!
By Maria Karlsson
Superyacht Insurance Group
754 234 4325