Designed to offer affordable health care to all Americans, the Patient Protection and Affordable Care Act (ACA) was signed into law in March 2010 and launched on Jan. 1, 2014 (although some provisions went into effect earlier). The ACA expands Medicaid and provides tax subsidies to help the lower- and middle-class get health insurance for themselves and their families.
Americans seeking health insurance can do so via the ACA website Healthcare.gov -- also called the health insurance marketplace -- during a period of open enrollment each year. If you're looking for health insurance, you fill out a survey, and the marketplace tells you which health insurance program(s) work for you. Depending on your income, you may also qualify for tax benefits that will lower the cost of your insurance.
The ACA also enacts a tax penalty on those who don't have health insurance, either through the ACA or their own private insurance. The penalty for 2014 is either 2 percent of your income, or $325 per adult ($162.50 per child) -- whichever is higher [source: Healthcare.gov].
You may only sign up for insurance through the health insurance marketplace during its open enrollment period. Typically, open enrollment for the new year starts in November of the previous year, and ends three months later in February. If you enroll during November or December, your health insurance starts on January 1.
However, you can change your health insurance outside of the open enrollment period if you have a life change, such as a marriage, childbirth or adoption, divorce, or change in income. Any life change must be reported to the marketplace, whether you plan to change your health insurance plan or not -- because it may affect your tax credits.
Keep reading to learn about how the ACA calculates tax credits, and how to report any life changes.
How the ACA Calculates Your Tax Credits
You can only receive tax credits on insurance purchased through the health insurance marketplace. When you purchase your health insurance, you may be eligible for a government subsidy on your premium in the form of a tax credit, based on your income level. (Note that if insurance is available through your employer but you choose to purchase your own insurance, you are not entitled to tax credits unless your job-based insurance is considered unaffordable by the ACA.)
You get this tax credit if your income falls between 100 percent and 400 percent of the federal poverty level. The closer you are to the poverty level, the more tax credit you receive. You can estimate what kind of credit you may be eligible for with the Kaiser Foundation's Health Reform Subsidy Calculator. The calculator asks you questions about your state, income, and family, and lets you know what subsidy amount is available to you.
The credit is paid directly to your insurance company, so you don't have to wait until you file taxes to receive the credit. This also means that you don't have to pay the full premium for your health insurance and then wait for reimbursement.
If you have a life change event, however, it may affect your tax credit. You should report these changes to the marketplace to ensure you don't end up paying extra taxes at the end of the year. Additionally, if you have a life change, you can typically bypass the open enrollment period and qualify for special enrollment to adjust your insurance more quickly. So, what exactly qualifies as a life change?
What Qualifies as a Life Change for the Affordable Care Act?
You may be eligible for a special enrollment period if you have a life change. This lets you purchase your private insurance outside of regular enrollment, or change your plan.
The ACA considers the following events "life changes":
- Change in family status: Divorce, marriage, having a baby, adopting a child
- Moving: Moving to a new coverage area with access to different health plans
- Change in citizenship status: Becoming a U.S. citizen or national
- Indian tribal status: Gaining tribal status
- Loss of regular coverage: Losing job-based coverage, loss through divorce, COBRA expiration, aging out of parent's plan, losing student plan after graduating college
- Domestic violence victim: If you are a victim of domestic abuse and previously could not enroll separately from your spouse
- If already enrolled in coverage through the ACA: Any change in income, profession, or household status
- Special circumstance: Extraordinary medical condition or natural disaster that prevented you from enrolling during the standard enrollment period
There may be other, more complex situations making you eligible for a life change, such as leaving incarceration. Check with the Health Insurance Marketplace to see if you qualify.
If you do qualify for a life change, you must report it. Keep reading to find out how.
Reporting Life Changes for the Affordable Care Act (ACA)
Typically, you have 60 days from your qualifying life event to report it to the ACA. However, you should report it as soon as possible. You may only report life changes online or by phone.
To report changes online, log in to your account at the health insurance marketplace website. Select your application, and choose "Report a life change." The program may ask you to upload documentation to prove your life change, like a marriage certificate or divorce decree. Ensure you have your documents in electronic format and ready to upload. The website will walk you through the process.
Once you report a life change, you'll receive a notice telling you if you qualify for the special enrollment period and if you're eligible for lower costs on your existing plan. If you do qualify for the special enrollment period, you can then enroll online or by phone.
If your tax credit has changed, you can't change plans, but you can adjust the amount of the credit you want to apply to your monthly premium. And remember, if your life change includes a change of name or address, remember to update your profile information as well.
- Fishman, Stephen, J.D. "Will You Qualify for Obamacare Tax Credits in 2014?" Nolo. 2014. (Oct. 19, 2014) http://www.nolo.com/legal-encyclopedia/will-you-qualify-obamacare-tax-credits-2014.html
- Health Insurance Marketplace. "A one-page guide to the Health Insurance Marketplace." Healthcare.gov. 2014. (Oct. 19, 2014) https://www.healthcare.gov/quick-guide/
- Health Insurance Marketplace. "Apply with a Special Enrollment Period." Healthcare.gov. 2014. (Oct. 19, 2014) https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/
- Health Insurance Marketplace. "Reporting life & income changes to the Marketplace." Healthcare.gov. 2014. (Oct. 19, 2014) https://www.healthcare.gov/how-do-i-report-life-changes-to-the-marketplace/
- Kaiser Family Foundation. "Subsidy Calculator." 2014. (Oct. 19, 2014) http://kff.org/interactive/subsidy-calculator/
- TurboTax. "What Life Events Qualify for a Special Enrollment Period Under the Affordable Care Act." Intuit. June 6, 2014. (Oct. 19, 2014) http://blog.turbotax.intuit.com/2014/06/06/what-life-events-qualify-for-a-special-enrollment-period-under-the-affordable-care-act/