Health Insurance & Your Taxes
Frequently Asked Questions
What is health care reform?
The Affordable Care Act (also known as Obamacare) requires Americans and legal residents to have health insurance. In addition, large employers are required to offer affordable health insurance that meets minimum value requirements.
What is the penalty for not having health insurance?
The penalty for not having health coverage in 2015 is 2% of taxable household income or $325 per adult and $162.50 per child, whichever is greater. In 2016, the penalty will be 2.5% of taxable household income or $695 per adult and $347.50 per child, whichever is greater. In 2014, the penalty was 1% of taxable household income or $95 per adult and $47.50 per child, whichever is greater.
How can I get insurance?
Liberty Tax can provide options to assist you with signing up for a qualified health plan. You can enroll in health insurance at your nearest Liberty Tax location, online, or by calling 844-281-1604.
Do I have to buy insurance from the health care Marketplace?
No. Most people can keep their current insurance policy, including those covered under Medicare, TRICARE, or employer sponsored insurance. However, this coverage must meet the minimum essential coverage or minimum value requirements set by the Affordable Care Act.
Is health insurance from the Marketplace free?
No. However, the Marketplace is the only place where you can apply for subsidies to help lower your health care costs. The Marketplace can also help you figure out if you are eligible for Medicaid.
When is the next open enrollment period?
Open enrollment for 2016 runs from November 1, 2015 until January 31, 2016.
Can I sign up for health insurance outside of open enrollment?
Experiencing major life changes can make you eligible for a special enrollment period, such as:
- having a child, adopting, or placing a child up for adoption
- moving outside of your previous insurance plan’s area
- gaining citizenship or lawfully present status
- being a member of a federally recognized Indian tribe, or as an Alaska Native
- being released from incarceration
- involuntarily losing previous health insurance coverage
- if already enrolled in an individual Marketplace plan and changes in income affect your eligibility for health insurance subsidies
What if I can’t afford insurance?
You can get a free quote and check to see if you qualify for a federal subsidy to help with the cost of health insurance here. You can also check to see if you qualify for a coverage exemption.
Since the amount I would pay for health insurance is based on my income, do I have to prove how much money I earn?
Yes. The Health Insurance Marketplace will verify your income through your tax return on file with the IRS, Equifax, or by reviewing paystubs.
Since subsidies are based on my income, what happens if my income changes during the year?
You should log into your Marketplace account and report any changes to your income or family size in order to prevent any confusion when it’s time to file taxes.
How can I get a subsidy?
Subsidies are only available through the Health Insurance Marketplace. Liberty Tax provides a subsidy calculator to help you determine if you qualify for any subsidies that will help reduce insurance costs for you and your family.
Can I qualify for subsidies even if I don’t pay taxes?
Yes. However, if you receive an advanced premium tax credit then you will be required to complete a tax return, even if your income is below tax filing threshold.
Is anyone exempt from the health insurance requirement?
If you did not have health care coverage starting January 1, 2015, you may be subject to a penalty unless you qualify for one of the following exemptions:
- you are a member of a federally recognized Native American tribe
- you are a member of a federally recognized health care sharing ministry
- you are a member of a recognized religious sect with faith-based objections to health insurance
- you are incarcerated
- you are an undocumented immigrant living in the U.S.
- you were only uninsured for less than 3 months during the year
- the lowest cost plan available through the Health Insurance Marketplace would cost more than 8% of your income
- your income is too low to be required to file a tax return; (in 2014, that’s less than $10,000 for individuals and less than $20,000 for a family)
- you earn too much to qualify for Medicaid, but not enough to qualify for health insurance subsidies, and reside in a state that did not expand Medicaid
- you experienced a hardship which prevented you from acquiring health insurance
Some exemptions can be claimed on the tax return, others you must apply for through your state’s health insurance marketplace. To find your state’s Marketplace and more information about them, go to www.healthcare.gov/marketplace/individual
How can I apply for an exemption?
Liberty Tax’s Affordable Care Act Health Exemptions Guide can help you complete an application for a coverage exemption. If you qualify, it will take approximately 2-8 weeks to receive your Exemption Certificate Number (ECN) from the Health Insurance Marketplace. Your ECN is needed to file your taxes.
Are businesses required to offer insurance to employees?
Businesses with 100 or more full-time employees during the 2015 tax year are required to offer insurance to employees. Beginning in the 2016 tax year, businesses with 50 or more full-time employees are required to offer insurance to employees. Businesses that do not offer insurance coverage to employees could face tax penalties. Smaller businesses, or businesses that do not meet the threshold requirement for full-time employees, are not required to offer health insurance to employees.
If my employer offers health insurance, can I still use the Marketplace?
Yes. However, you cannot qualify for any subsidy programs unless your employer offers coverage that isn’t affordable or doesn’t meet minimum value requirements. In addition, your employer cannot contribute to your premiums if you purchase a Marketplace plan.
Are there tax subsidies available for smaller employers who offer health insurance to full-time employees?
Yes. For smaller companies that want to offer insurance to employees, tax credits are available to offset part of the costs if the company purchases coverage through the SHOP Marketplace.
I am the parent of a college student. Can I keep my child on my health plan?
If your child is under the age of 26, you can keep him or her on your health insurance plan. Those over the age of 26 will need to have their own qualified health plan or qualify for a coverage exemption to avoid a penalty on their taxes.
Actuarial Value (AV): The percentage of total average costs for covered benefits that a plan will cover. For example, for a 70% AV plan, on average, the policyholder would be responsible for 30% of the costs of all covered benefits and the insurance company would cover 70%.
Administrative Period (applies to employer-sponsored plans): Employers have up to 90 days to assess each employee, determine if the employee is classified as a full-time employee, and to notify the employee of his/her eligibility.
Advanced Premium Tax Credit (APTC): Federal subsidies that are sent directly to an individual’s insurance company, reducing the amount of his or her plan’s monthly premiums (see Premium Tax Credit.)
Affordable Care Act (ACA): A law passed in 2010 requiring Americans to maintain health insurance coverage. The goal of the act is to help slow the increasing cost of health care and increase access to affordable health insurance options.
Affordable Coverage (applies to employer-sponsored plans): To meet the minimum value standards under the ACA, the employee’s portion of the annual premium must be no more than 9.5% of the employee’s household income.
Benefit Period: The length of time during which an individual is covered by health insurance.
Children’s Health Insurance Program (CHIP): CHIP is low-cost insurance for children whose families earn too much to be eligible for Medicaid. CHIP covers routine check-ups, immunization, inpatient and outpatient hospital care, laboratory and X-ray services, and more. Eligibility is based on family size and gross monthly income.
Co-Pay: A payment that is made by the insured person each time he or she receives medical services.
Cost-Sharing Reduction (CSR): Cost-Sharing Reductions decrease the amount an individual or family must pay out-of-pocket for medical services throughout the year. This reduction can only be applied towards Silver plans available in the Health Insurance Marketplace.
Deductible: The amount of money that must be paid by the policy holder before the health insurance company starts paying for medical services.
Dependent Coverage: Health insurance for a policyholder’s dependents.
Family Size: The total number in a family. This may include the taxpayer, spouse, and dependents.
Ex. TJ is married and has two dependents. TJ’s family size is:
Federal Poverty Level: The amount of income a family needs for food, clothing, transportation, shelter and other necessities. It changes every year and in 2015 was $11,770 for one person; for each additional family member add $4,160. The FPL in Alaska and Hawaii vary from the rest of the country. The FPL is recalculated every year by the Census Bureau.
Full-Time Employee: Determined on a monthly basis. An eligible employee works at least 30 hours per week or at least 130 hours per month. The calculation includes all paid hours including but not limited to: vacation, military duty, holiday, sick pay, jury duty, disability.
Full Time Equivalent: The number of full time equivalent employees is used to determine whether an employer is considered a Large Employer. It is determined by the total number of hours worked (both full time and part time employees) during the tax year divided by 2,080 (the number of hours worked per year to be considered a full time employee).
Government-Sponsored Plans: Plans like Medicare, Medicaid, CHIP, TRICARE, and Veteran Affairs Health Benefits. These plans are subsidized by the federal government.
Grandfathered Health Insurance Plans: These are either group or individual plans that were in effect on or before March 23, 2010, the date of the ACA’s enactment. Grandfathered plans are not subject to certain reform provisions. Grandfathered plans must cover dependent children up to age 26 and prohibit pre-existing condition exclusions for children under 18 years of age beginning October 1, 2010.
Health Insurance: A type of insurance coverage that covers certain medical and surgical expenses that are incurred by the insured.
Health Insurance Exchange / Marketplace (Marketplace or Exchange): The Marketplace maintained by a state or the federal government, which offers a choice of health insurance plans. Plans in the Marketplace must meet minimum essential coverage and affordability standards. Plans purchased from the exchange are often called individual marketplace plans.
Household Income: The total amount of modified adjusted gross income (MAGI) for the taxpayer, spouse (if applicable), and dependents (if applicable). This amount can make several determinations including how much of a subsidy a family may qualify for or what is considered “affordable coverage” for a household. This includes adjusted gross income, tax-exempt interest, excluded foreign income, and any pre-tax deduction for employer-sponsored coverage.
Individual Mandate: Effective on January 1, 2014 most people must have a qualified health plan or they will be subject to a tax penalty.
Individual Shared Responsibility Payment aka Penalty: An additional tax that individuals will have to pay if they don’t have a health insurance plan which meets minimum value or minimum essential coverage and cannot qualify for an exemption. This penalty is paid on the tax return. An individual or family is allowed up to 90 days per year without coverage before they have to pay the fine.
In-Person Assistance: In-Person Assisters are similar to Navigators. They are expected to conduct outreach and assist consumers and small employers with health insurance eligibility, enrollment and plan selection. The difference is they do not have to be funded through grants, they don’t have to be certified, and they can offer varying levels of assistance.
Insurance Premiums: The monthly fee that a health insurance policyholder paid for coverage during the benefit period.
Large Employer: A large employer is a company that has more than 50 full-time equivalent employees.
Large Employer Mandate: Employers with more than 50 full-time equivalent employees must provide a health insurance option for its full-time employees or be subject to tax penalties. This mandate is effective for employers with 100 or more employees on January 1, 2015. The mandate will become effective for employers with 50 or more employees starting January 1, 2016.
Large Employer Penalties: Tax penalties that employers will have to pay if they don’t offer affordable health plans that meet minimum value to at least 95% of their full-time employees. The penalty is calculated monthly and is based on the level of coverage provided. There are two potential penalties: “No Coverage Penalty” and “Unaffordable Coverage Penalty”
Look Back Measurement Period (applies to employer-sponsored plans): Method to determine if a company is a large or small employer by using a period in time, determined by the employer, which is no longer than 12 months and no shorter than 3 consecutive months. The 2015 company status will be determined by their 2014 look back period.
Medicaid: A program providing low-cost health insurance for most low-income individuals that is financed by the state and federal governments.
Medicare: A program of hospitalization insurance and voluntary medical insurance for persons aged 65 and over and for certain disabled persons under 65.
Minimum Essential Benefits: All individual plans and those sold to small business must offer a comprehensive package that includes: emergency services, lab services, mental health and substance abuse treatment, rehabilitative and habilitated services, hospitalizations, pediatric care, preventative care, maternity care, outpatient or ambulatory care, vision and dental care for children.
Minimum Essential Coverage: The type of health insurance that individuals must have in order to meet ACA requirements and avoid tax penalties. The plan must include the essential health benefits. Types of plans include: employer-sponsored retiree health plan, Medicare, Medicaid, CHIP, TRICARE, coverage from a health plan purchased in the Marketplace.
Minimum Value (applies to employer-sponsored plans): The standard that an employer-sponsored plan must cover in order to meet the ACA’s requirements. The plan must cover at least 60% or more of the benefits covered under the plan.
Navigator: Navigators are funded through grants and are expected to conduct outreach and assist consumers and small employers with health insurance eligibility, enrollment and plan selection as outlined by the ACA regulations. In addition, they must be certified.
No Coverage Penalty (applies to employer-sponsored plans): A tax penalty that employers will have to pay if they do not offer group coverage to at least 95% of full time employees and at least one employee qualifies for a Premium Tax Credit (PTC) or Cost-Sharing Reduction (CSR).
Open Enrollment: The annual period when an insurance company allows individuals to make changes to their existing plans or enroll in coverage.
Out-of-Pocket Costs: The patient costs when receiving medical services, such as co-pays, coinsurance, and deductibles. Insurance premiums are not included in the out-of-pocket costs.
Out-of-Pocket Maximums: The maximum amount you are obligated to pay for medical services received throughout the year.
Pay or Play (applies to employer-sponsored plans): In general, large employers must offer health insurance to its full time employees and their dependents, up to age 26 that meets minimum value. Spouses do not need to be covered. Large employers who fail to do so will be subject to a tax penalty for every full time employee or equivalent.
Plan Year / Policy Year: The 12-month benefit period defined by the insurance provider. This typically begins the first day of the first or second month after the plan was purchased for the group or individual, or on the first of the year.
Premium Tax Credit (PTC): Federal subsidies that reimburse a portion of monthly premiums, lowering the cost of health insurance purchased from a Health Insurance Marketplace. The credit is available to individuals whose annual income is between 100% and 400% of the Federal Poverty Level. Individuals can choose to receive their premium tax credit through their tax return, or opt to receive them in advance (see Advanced Premium Tax Credit.)
Qualified-Health Plan: A health insurance plan that meets requirements under the ACA. This includes key characteristics such as essential health benefits, and caps on deductibles, copayments, and out-of-pocket costs.
Stability Period (applies to employer-sponsored plans): Once the employer has determined and notified the employee of their full-time status, employees will be considered full-time for a stability period which can be no less than the measurement period. At the end of the stability period, the employer may again measure the employee’s status.
Subsidy: Government assistance to help middle and low-income individuals afford health insurance. There are two types of subsidies: Premium Tax Credits (PTC) and Cost-Sharing Reductions (CSR).
TRICARE: A health insurance program for military and their dependents.
Underinsured: Individuals who have some form of health insurance but have at least one of the following qualifiers: medical expenses greater than 10% of their annual income, an annual income less than 200% of the Federal Poverty Level and medical expenses greater than 5% of their annual income, or health plan deductibles equal to or greater than 5% of annual income.
Unaffordable Coverage Penalty (applies to employer-sponsored plans): A tax penalty that large employers will have to pay if they fail to offer health insurance which is both affordable, and meets minimum value to at least 95% of full time employees; and at least one employee qualifies for Premium Tax Credit (PTC) or Cost Sharing Reduction (CSR).