The government shutdown is over and life back to normal, or near normal, including the continued rollout and startup of the Affordable Care Act. It seems like everyone is talking about the new system and what it means to many Americans -- those directly impacted, those without insurance, employers, insurers and the many other impacted by the current law. As we continue to see more and more information, details and guidance many new terms and technical words are being used. There are so many terms and new concepts that for many it can be very confusing. To help you out, we put together a useful list of common terms that you can use as a go-to guide as you continue to learn more about this new law.
Affordable Care Act (ACA) -- Also known as "Obamacare" or "Health Care Reform," the ACA is a series of laws passed by Congress and signed into law by President Obama in 2010. The official name is the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. Many federal agencies including Health and Human Services (HHS), IRS, and the Department of Labor (DOL) have published implementing rules since the Act passed in March 2010.
Advance Premium Tax Credit (APTC) -- A monthly payment of 1/12 of the projected Premium Tax Credit (PTC) for a taxpayer who has insurance through the Insurance Marketplace. The payment is calculated by the Marketplace and made to the insurance provider directly from Treasury. Taxpayers must settle up or "reconcile" the advance payments with their actual credit amount when they file their tax returns for the respective tax year.
Affordable coverage -- To be considered affordable, the premium for employee-only coverage from an employer-sponsored insurance plan must be less than 9.5 percent of the employee's household income. Thus, an employee with affordable employee-only coverage would be ineligible for the ACA's new premium assistance tax credits. Under the "family glitch" in the ACA rules, coverage is considered affordable for the family if the coverage is affordable for the employee.
CHIP or Children's Health Insurance Program -- This provides free or low-cost health coverage for children up to age 19 in low-income families. In some states CHIP also covers pregnant women who are income ineligible for Medicaid but can't afford private health insurance. CHIP is available in every state, though many states combine their CHIP and Medicaid program offerings. The income limit for CHIP varies by state.
Family or Household -- For tax credit purposes, a taxpayer's family/household includes the taxpayer, spouse (when filing jointly) and any dependents claimed on the taxpayer's return.
For tax penalty purposes, the household includes the taxpayer, spouse (when filing jointly) and any dependents who could be claimed on the taxpayer's return.
For Medicaid/CHIP purposes, the household includes the taxpayer, spouse (if married and living together) and any dependents living with the taxpayer at the time that they apply for Medicaid/CHIP. Medicaid requires the custodial parent to include a child in their Medicaid household even if the non-custodial parent will be claiming the child on their taxes.
Family Glitch -- The cost of family coverage is not considered when determining the affordability of coverage. Consequently, the dependents of an employee with affordable employee-only coverage are generally not eligible for the new tax credits -- even if the employer contributes nothing to the cost of dependent coverage.
FPL or Federal poverty guideline -- The federal poverty guideline is the amount of income considered the poverty level and is determined by family size. The Department of Health and Human Services (HHS) publishes a uniform guideline for the 48 contiguous states and DC, and it also publishes separate guideline for Alaska and another for Hawaii each year. The federal poverty level (or 100 percent FPL) ranged from $11,490 for singles and $23,550 for a family of four (for the lower 48 continental states and DC) in 2013. For reference, the Premium Tax Credit uses the most recently published guidelines when the annual open enrollment period begins. In contrast, Medicaid and CHIP use the FPL in effect at the time that the marketplace receives the application. The federal government typically updates the FPL in February of each year.Household Income -- This is the Modified Adjusted Gross Income (MAGI) for you and every individual in your family you can claim an exemption for and that is required to file a tax return. MAGI is defined differently based on what it is used for:
- The Premium Tax Credit -- includes adjusted gross income (AGI) plus any excluded foreign income, any tax-exempt interest received or accrued during the year, and non-taxed Social Security benefits.
- Shared Responsibility Penalty -- includes adjusted gross income (AGI) plus any excluded foreign income and tax-exempt interest received or accrued during the year.
Insurance Marketplaces -- also known as Insurance Exchanges and Insurance Market Exchanges. Government-run resource for individuals, families, and small businesses to learn about health care options, compare available health care plans, choose a plan and enroll in coverage. Persons can apply for Medicaid, CHIP, the new tax credits and cost-sharing reductions using the new marketplaces. Taxpayers eligible for the tax credits can only use the credits to buy coverage on the new marketplaces.
Medicaid -- Medicaid is a government-funded, state-run health coverage program traditionally available to children, families, pregnant women, the elderly and people with disabilities. Under the ACA, states may expand coverage to all persons under 65 who have household incomes under 138 percent FPL. Medicaid benefits and eligibility categories, income limits and asset limits vary from state to state. The Medicaid program may have a different name in various states (e.g., Medi-Cal in California and TennCare in Tennessee).
Minimum Essential Coverage (MEC) -- Health insurance coverage under a government- sponsored program, an eligible employer-sponsored program, a plan from the Marketplace, or other plans recognized by the Secretary of Health and Human Services. Persons with minimum essential coverage may not be subject to the Shared Responsibility Penalty.
Minimum Value -- Minimum value reflects an actuarial calculation of the amount of an average person's medical bills that the insurance plan would pay. Under the ACA, the minimum value for all insurance plans is 60 percent. This means that insurance plans cannot have deductibles, copayments and other types of patient cost sharing of more than 40 percent of the medical costs of the average person. If a plan has deductibles and other cost-sharing levels above this level, then the plan does not satisfy the "minimum value" criterion.
Open enrollment -- The time period when eligible taxpayers can enroll in qualified health plans through the Insurance Marketplaces. The initial open enrollment period runs October 1, 2013 through March 31, 2014 and for each year after it will be October 15 through December 7. Taxpayers who have a major life change such as marriage, divorce, birth of a child, change in income, loss of insurance, etc. may be able to enroll or change qualified health plans in the periods between the open enrollments. Please note that the open enrollment period applies only to the tax credits and qualified health plans. Medicaid and CHIP programs allow enrollment any time during the year.
Premium Tax Credit (PTC) -- A tax credit that goes by many names including the Premium Assistance Tax Credit and the Health Insurance Premium Credit. This is a refundable credit for uninsured taxpayers whose income is between 100 and 400 percent of the federal poverty level for their household. To qualify, taxpayers must not have an offer of affordable coverage that provides minimum value. They must also not be enrolled in Medicaid, Medicare, or Veteran's Administration health programs. Taxpayers can only the claim the tax credits if they buy coverage on the new insurance marketplaces.
Shared Responsibility Payment -- The penalty assessed on nonexempt taxpayers for each month they do not have minimum essential coverage beginning after December 31, 2013. Exemptions are available for taxpayers with no tax filing obligation, short coverage gaps, without access to coverage costing less than 8 percent of their income, religious objections to having insurance, American Indians, unauthorized immigrants, incarcerated individuals, residents of U.S. territories, persons with defined hardships, and others.
There's a lot to know, when it comes to the ACA. New rules and terms with clarification and explanations for rules and terms already in place -- but that is to be expected with such a comprehensive and new system. The most important take-away is that your health care is now tied to your taxes and the more you know and understand the better the decisions are that you make. If you're confused, which is understandable, speak to your trusted tax preparer for assistance. Understand all the rules and keep more of your money.