Health Care Choices in 2014

With the advent of the Affordable Care Act, the American taxpayer has some important decisions to make in 2014 concerning health care coverage. We think knowledge goes a long way toward greasing the wheels of decision-making, so we’re passing along some tidbits that could help you determine what's best for you.

Starting this year, you will choose to either have basic health insurance coverage (known as Minimum Essential Coverage) for yourself and everyone in your family – or go without health care coverage for some or all of the year.

Those who don’t maintain health insurance coverage will need to either seek an exemption or make a payment (called an “individual shared responsibility payment”) when they file their 2014 income tax return next year.

So, What Qualifies?

If you choose to have health care coverage, qualifying coverage would include:

• Health insurance coverage provided by your employer (includes COBRA and retiree coverage)
• Health insurance coverage you purchase through a Marketplace
• Medicare, Medicaid or other government-sponsored health coverage, including programs for veterans
• Coverage you buy from an insurance company

If you qualify for health insurance coverage through a Marketplace, you could be eligible for financial assistance – including the Premium Tax Credit, which will help lower the out-of-pocket cost of your monthly insurance premiums.

Qualifying coverage does not include certain coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition.

Going Without

Even if you decide to forego coverage, or have a gap in coverage, you could qualify for an exemption if you don’t have access to affordable coverage or have a gap of less than three consecutive months.

There’s a special hardship exemption for those who purchased their insurance through the Marketplace during the initial enrollment, but due to the enrollment process, have a gap of coverage at the beginning of 2014.

Let’s say you opt not to have health care coverage, and you don’t qualify for an exemption. Then what?

Then, you’ll have to make an individual shared responsibility payment on your 2014 taxes (which you file in 2015). In general, the payment amount is either a percentage of your household income, or a flat-dollar amount, whichever is greater.

The annual payment amount for 2014 is the greater of:

• 1 percent of your household income that’s above the tax return filing threshold for your filing status (such as Married Filing Jointly) or
• Your family’s flat-dollar amount, which is $95 per adult, and $47.50 per child, up to a maximum of $285.

If your payment is for only part of the year (for a gap in coverage, for example) you’ll owe 1/12 of the annual payment for each month you don’t have coverage or are not exempt.

If you'd like to see what your payment might be, we have a calculator that tells you just that. 

There's Still Time to Act

Remember, none of these payments take effect until 2015 – when you do your 2014 return.

But the choices you make this year will have a lot to do with your tax return next year.