Mandatory Health Insurance Starts This Month—Are You Ready?

Tax Attorneys at Ainer & Fraker, LLP Discuss the Mandatory Health Insurance Requirements of the Affordable Care Act (Obamacare) in 2014.

Beginning in January 2014, everyone, with certain exceptions, is required to have minimum, essential health care insurance. This issue has received a significant amount of press coverage recently, both negative and positive. Regardless of your opinion related to the issue, the mandatory insurance requirement, together with the accompanying penalties for not being insured, premium assistance credits, and insurance subsidies, all begin in 2014. The new marketplace, also called exchanges, where insurance policies can be purchased, have debuted already, but with mixed success. These new provisions are all part of the Affordable Care Act (sometimes referred to as Obamacare) that are being phased in over a number of years.

How this will affect you and your family will depend upon a number of issues:

Already insured If you are already be insured through an employer plan, Medicare, Medicaid, the Veterans Administration, or a private plan that provides minimal, essential health care, then you will not be subject to any penalties under this new law.

Those exempt from the mandatory insurance requirement The following individuals are exempt from the insurance mandate, and will not be subject to a penalty for being uninsured:

  • Individuals who have a religious exemption
  • Those not lawfully present in the United States
  • Incarcerated individuals
  • Those who cannot afford coverage based on formulas contained in the law
  • Those who have an income below the federal income tax filing threshold
  • Those who are members of Indian tribes
  • Those who were uninsured for short coverage gaps of less than three months
  • Those who have received a hardship waiver from the Secretary of Health and Human Services, who are residing outside of the United States, or who are bona fide residents of any possession of the United States.

Help for those who can’t afford coverage Individuals and families whose household income is between 100% and 400% of the federal poverty level will qualify for a varying amount of subsidies to help pay for the insurance in the form of a Premium Assistance Credit. The lower the income, the more substantial the credit, which slowly phases out as the income increases, and is totally eliminated when the income reaches 400% of the poverty level. For those in the lower income levels, the subsidy will usually cover the bulk of the insurance costs.

To qualify for that credit, the insurance must be acquired from an insurance exchange operated by the individual’s or family’s resident state, or by the federal government when the state does not have an exchange. These exchanges have been up and running (more or less) since October 1, 2013, allowing individuals and families to apply for coverage which will become effective as of January 1, 2014.

There has been considerable negative press related to the federal exchange. The federal Internet site has not been functioning efficiently, but the administration says the problems will be corrected so everyone who needs to, can apply. Individuals who reside in states with their own exchange will use their state’s exchange and should not be concerned with the federal exchange. In general, the state-run exchanges seem to be operating smoother than the federal exchange, but some of the state exchanges have also had their problems. Some insurance companies offering insurance through an exchange also offer assistance in signing up through the exchange without going through the website. But be cautious—to be eligible for a subsidy, the insurance must be purchased through an exchange. If you purchase a policy directly from an insurance company without going through an exchange, you won’t be qualified for a subsidy, regardless of your income level.

It is important to note that the subsidy is really a tax credit based upon family income. It can be estimated in advance, and used to reduce the monthly insurance premiums; it can be claimed as a refundable credit on the tax return for the year; or it can be some combination of both. However, it is based upon the current year’s income and must be reconciled on the tax return for the year. If too much was used as a premium subsidy, some portion may need to be repaid. If there is an excess, it is refundable.

If household income is below 100% of the poverty level, the individual or family qualifies for Medicaid.

Penalty for noncompliance The penalty for noncompliance will be the greater of either a flat dollar amount or a percentage of income:

  • For 2014, $95 per uninsured adult ($47.50 for a child), or 1 percent of household income over the income tax filing threshold
  • For 2015, $325 per uninsured adult ($162.50 for a child), or 2 percent of household income over the income tax filing threshold
  • For 2016 and beyond, $695 per uninsured adult ($347.50 for a child), or 2.5 percent of household income over the income tax filing threshold

Flat dollar amounts The flat dollar amount for a family will be capped at 300% of the adult amount. For example, in 2014, the first year for the penalty, the maximum penalty for a family will be $285 (300% of $95). But for 2016, the maximum penalty jumps to $2,085 (300% of $695). The child rate will apply to family members under the age of 18.

Overall penalty cap The overall penalty will be capped at the national average premium for a minimal, essential coverage plan purchased through an exchange. This amount won’t be known until a later date.

Please Contact a Tax Attorney at Ainer & Fraker, LLP if you have any questions as to how the new insurance requirements of the Affordable Care Act (Obamacare) will affect you.

How Can I Prevent what Happened to Terry Schiavo from Happening to Me?

On March 31, 2005, Terry Schiavo passed away, after a fifteen (15) year legal battle over her fate. During this time, her case became a national lightning rod for the discussion over end-of-life issues.

In brief, Terry had collapsed in her home on February 25, 1990. When the EMT’s arrived, she was not breathing and had no pulse. Various emergency medical procedures were immediately enacted, however, her brain suffered from a lack of oxygen, and she fell into a Persistent Vegetative State (PVS).

In the months and years that followed, a protracted legal battle ensued between her husband, Michael Schiavo, and her parents, Robert and Mary Schindler, about what Terri would have wished for herself. Michael argued that Terri would have wished for treatment to have been withdrawn. The Schindlers argued that Terri was a devout Roman Catholic, and would never have wished to violate the Church’s teachings on euthanasia by refusing food and water treatment.

A Completely Unnecessary Tragedy

Beyond the personal and medical tragedy that befell Terry Schiavo, what made matters even worse is that the fifteen year legal battle which ensued was completely unnecessary.

To completely over-simplify the legal case: both sides argued that they knew best what Terry wanted for herself.

What was completely missing in this case was a clear and unambiguous declaration by Terry of her own decisions in this matter.

Because there was no living will in effect, both sides were forced to argue that they knew what she wanted. Had there been a valid living will, it would have been executed, and the entire legal drama could have been avoided.

What is a Living Will?

In the legal world, there is a legal document known as a living will, or here in California, an Advance Health Care Directive.

This document is designed to do two things: (1) Make your decisions regarding health care, and end-of-life decisions, perfectly clear and then (2) Nominate another person (an agent for health care) to carry out your wishes, on your behalf, if you are not able to do so yourself.

With a living will, the decisions remain your own. Your agent is not allowed to substitute their judgment for your own, their only role is to carry out your wishes. Without a living will, the hospitals and Courts will have to substitute someone else’s judgment for your own.

What Can You Do to Protect Yourself?

We understand that these types of decisions are difficult to think and talk about. However, they are far too important to leave to others.

]Here are a few guidelines for how you can protect yourself:

(1) Talk about these issues with your spouse, your family, your pastor, your spiritual mentor(s). Pray over these decisions, but also let others know what you would want.

(2) Execute a Valid Living Will or Advance Directive. As important as it is to discuss with your loved ones, it is equally important to put your wishes into legal effect, through a validly executed Living Will or Advance Directive.

(3) Tell your doctors and your family that you have executed such a document, and make sure it can be found quickly in an emergency. A recent study shows that as many as one-half of all living wills fail because they can not be located in an emergency, when they are needed most.

(4) Most importantly, don’t try to do this alone. We encourage everyone to work with appropriate legal counsel, who can provide guidance, answer questions, and ensure that your documents are legally valid.

These decisions are far too important, too personal, and too spiritual to leave in the hands of a Court, a hospital, or a third-party. You need to take control of your own decisions, by executing a valid living will or Advance Health Care Directive today.

(c) 2009 Ainer & Fraker, LLP.