Affordable Care Act
Part 3: The Health Insurance Exchange
I’m back again this month with my Affordable Care Act series, discussing the most frequently asked questions I receive on Obamacare. As I’ve mentioned before, this is, by far, one of the most complex reforms to our healthcare system, and it comes with rules you should understand or be prepared to pay an additional tax known as the Individual Shared Responsibility Payment.
Learn more about the first two most frequently asked questions in part one and two of this series:
- Part 1: Learn about the Individual Shared Responsibility Payment and how to calculate it.
- Part 2: Learn about the exemptions to the penalty.
The Third Most Common Question
The third most frequently asked question I get is “What is the ‘Exchange,’ and do I have to get my health insurance there?”
The health insurance exchange is an online marketplace where both individuals and small employers can shop for and obtain health insurance coverage. “Open Enrollment” is the period of time when you should enroll for coverage, and open enrollment for the 2017 calendar year begins Nov. 1, 2016 and ends on Jan. 31, 2017.
Since life is full of surprises, there are certain life events that allow a taxpayer to obtain health insurance coverage through the exchange outside of this enrollment period. These life events include such things as the birth of a baby, adoption, a divorce or a legal separation resulting in the loss of qualifying health coverage.
There are many online marketplaces that exist, including:
- 13 state-based marketplaces
- 4 federally supported marketplaces
- 7 state-partnership marketplaces
- 27 federally-facilitated marketplaces
If you are covered through your employer or your spouse’s employer, then the exchange is probably unnecessary for you. If you don’t currently have health insurance and you need to purchase your own, you are encouraged to do so through the exchange but it’s not required. You are able to go directly to a provider and obtain coverage, but you may want to shop at the exchange to compare prices.
Shopping for Insurance
Shopping for and obtaining health insurance through the exchange is primarily done online. You can visit healthcare.gov or visit your state-run exchange, if available, and set up an account by providing information such as your income, age and address. You’ll be provided with a list of policies available, as well as any eligibility for federal subsidy.
Reporting Income for Tax Credits
If your income level qualifies you for a tax credit subsidy, it will be applied to and reduce your monthly premium amount. However, reporting your income can be tricky! Marketplace savings are based on your expected household income for 2016, not your 2015 income. Income reported should include yours, your spouse’s, if married, and everyone you’ll claim as a tax dependent on your 2016 federal tax return who’s required to file a tax return. You’ll need to include their income even if they don’t need health coverage.
If your final 2016 income is higher than your estimate, you probably received more tax credits than you qualified for, and you’ll likely have to pay back the difference with your 2016 tax return. Be sure to report your income as close to the actual amount as possible, and update your income information on your application as soon as any changes occur to avoid a big tax bill next year!
Part 4 coming soon!
Be sure to check back for next month’s blog, covering part four of this four-part series on the Affordable Care Act.
If you have other questions, feel free to contact me directly by email at email@example.com.
Contributed by: Tina L. Moe, CPA, CGMA, President & CEO
See the rest of the series!
- Affordable Care Act: Part 4 – Cost of Insurance Through the Exchange