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Understanding How the Affordable Care Act Affects You and Your Family

Posted by Admin Posted on June 15 2015

Most people are familiar with the Affordable Care Act, or “Obamacare” as it is commonly called, but few people know how it affects them individually. In fact, many of our clients are surprised at the end of the year when they learn the amount they’re being penalized for not having health insurance. We want to provide you with some basic information about the Affordable Care Act and its associated penalties so that you know how it will affect you.

The Basics

The Affordable Care Act requires US citizens to purchase health insurance. If you can afford insurance but elect to not buy it, you need to have a health coverage exemption, or you will face a fine at the end of the year. This penalty is calculated based on either your annual income or on a flat, per-person fee for your household.

The Fines

In 2014, those without coverage had to either pay 1% of their yearly household income or $95 per person for the year, whichever was higher. For 2015, this fine will be increased, and those without coverage will have to pay the higher of these two amounts:

  • 2% of the yearly household income, with the maximum penalty being equal to the national average premium for a Bronze health plan.
  • $325 per person for the year, and $162.50 for children under 18, with the maximum penalty being $975 per family.

Obviously, the penalty for 2015 will be much higher than it was for 2014, and the fines are expected to continue increasing every year. For 2016, the penalties are already projected to be 2.5% of the household’s annual income or $695 per person.

These fines are paid when you file your annual tax return.

Gap Exclusions

If you lose your job and are without benefits for a short amount of time, you can still avoid paying the penalties. The Affordable Care Act offers a short-term coverage gap exclusion for those who are without coverage for 3 months or fewer throughout the course of the year. This allows you the time to search for employment and health coverage, or to purchase government-sponsored health insurance to cover the gap until you can find new employment and benefits.

It is also important to note that the penalties are prorated based on the number of months you are without coverage. So, if you have not had health insurance so far in 2015, you can still find coverage and face a lower penalty at the end of the year.

If you are still unsure of how the Affordable Care Act will affect you, or you need help planning for the healthcare penalty on your taxes, give us a call or stop by our office.