What Does the Law Require of Me?
The Affordable Care Act (ACA) requires that you, as a U.S. citizen or legal resident, must have health insurance, unless you qualify for an exemption.
If you don’t qualify for an exemption, and go without health insurance that provides what’s known as “minimum essential coverage” for more than three months, you’ll have to pay a penalty, which you’ll find listed as “individual shared responsibility” on your income taxes.
The penalty is figured up in one of two ways: You’ll either pay a percentage of your household taxable income (which you’ll figure on your annual tax return), or else you’ll pay a flat rate, whichever is greater.
For 2017, the penalty is $695 per adult and $347.50 per child, up to a maximum of three times that amount ($2,085) per family, or 2.5 percent of household income. Each year, the penalty will go up, to keep pace with inflation and to encourage people to buy health-insurance coverage. After 2016, the penalty will be increased annually based on a cost-of-living adjustment.
Exemptions from Health Insurance Are Granted to People Who:
- Would have to spend more than 8 percent of their income to buy a qualifying plan
- Don’t have to pay taxes because their incomes are too low
- Experience only a short coverage gap (less than three months)
- Are members of a federally recognized American Indian tribe (or are Alaska Native Claims Settlement Act shareholders)
- Are eligible for care through a tribal healthcare provider
- Are members of a recognized religious sect with objections to insurance
- Are members of a healthcare-sharing ministry
- Experience a hardship (hardships are explained here)
- Are incarcerated during a coverage year
- Are not lawfully present in the United States
Minimum Essential Coverage Includes:
- Any health plan bought through the Health Insurance Marketplace
- Most employer-sponsored plans, including COBRA and retiree coverage
- Individual health plans bought outside the Health Insurance Marketplace, if they meet the standards for qualified health plans
- Medicare Part A and Medicare Advantage plans
- Medicaid, except for limited-coverage plans
- C. Health Choice for children
- Coverage under a parent’s plan
- Most student health plans (check with your school)
- Certain types of veterans health coverage through the Veterans Administration
- Most TRICARE coverage
ACA Insurance and Your Income Taxes:
When you apply for ACA insurance through the Health Insurance Marketplace, you must agree to file an income tax return for each coverage year. If you’re married, you have to file a joint income-tax return.
If anyone in your household has a Marketplace insurance plan, you’ll receive IRS Form 1095-A by mid-February of that coverage year. You’ll need this form to finish your federal income taxes (if you get your health insurance through your job, you’ll instead receive either a 1095-B or 1095-C form).
Your 1095-A contains information about Marketplace plans any member of your household had including:
- The premiums paid
- Premium tax credits used
- A figure called “second lowest cost Silver plan” (SLCSP). This is not necessarily the plan you enrolled in, but you’ll need the SLCSP to determine your premium tax credit.
Tax form 1095-A is used to complete another form (IRS Form 8962) to “reconcile” the previous year’s premium tax credits.
Reconciling tax credits can start to sound pretty confusing pretty quickly; you’re welcome to contact one of our Certified Marketplace Navigators at 1 (877) 755-5438 for a fuller explanation based on your own circumstances.
Basically, reconciling your tax credits means finding out if you used the right amount of premium tax credit during the year. If you used more than you qualify for, then you’ll have to pay the difference at tax time. If you used less, you’ll get the difference in your tax refund.
Note that if you don’t reconcile your premium tax credits, you may lose them altogether, and owe a penalty on your taxes. You may also lose health coverage for the rest of the year as well, and you won’t be allowed to enroll again until your premium tax credits have been reconciled.
For more information on how your ACA health-insurance policy relates to your taxes, click here.