By Ken Berry
It's not exactly like a new Walmart is moving in down the street, but the state-operated health insurance marketplaces will have their "grand opening" October 1. The long-awaited launch was mandated by the Affordable Care Act (ACA) – commonly referred to as "Obamacare" – which is designed to help provide affordable coverage to low-to-moderate income families.
Although some confusion among consumers is expected the first few months, early returns seem to indicate that the cost of insurance sold through most exchanges should be less expensive than initially anticipated. What's more, some taxpayers may benefit from a special government subsidy in the form of a tax credit. It's like getting a gift card to buy health insurance.
Here's the offer: The government will pay for part or all of the insurance premiums for individuals earning between 100 percent of 400 percent of the federal poverty level, or between about $23,550 and $94,200 per year for a family of four. Consumers won't have to pay more than a certain percentage of their income, ranging from 2 percent for those with incomes of up to 133 percent of the poverty level, or about $31,322 for a family of four, to 9.5 percent for those with an income between 300 to 400 percent of the poverty level. The dollar amounts of credits are based on the costs of mid-level insurance plans.
Individuals who earn less than 250 percent of the poverty level, approximately $58,875 a year for a family of four, may also benefit from cost-sharing reductions for deductibles, co-payments, and coinsurance costs. These subsidies, allocated on a sliding scale, are also based on the cost of mid-level plans offered through the state exchanges. As a result, it's possible that some people who choose a "bare bones" policy won't have to pay much, if anything, out of their own pockets on a monthly basis.
The income levels for subsidies and cost sharing are actually based on modified adjusted gross income (MAGI) for 2014. The government is advising taxpayers to get a handle on their MAGI before they go shopping in the state-run exchanges. When appropriate, you can provide assistance to clients.
Only individuals without affordable employer-based insurance can avail themselves of the state-run exchanges. Government officials estimate that 3 percent of the population, roughly 7 million people, will buy health insurance through a state exchange in 2014. Despite this relatively low percentage, the new state exchanges represent an opportunity for uninsured Americans to obtain affordable health insurance at a tax discount.
The open enrollment period runs from October 1, 2013, through March 31, 2014. Any policy obtained via an exchange during this period will take effect January 1, 2014.