Oct. 2, 2013 -- To help readers on Day 1 of open enrollment for the health insurance Marketplaces, WebMD hosted a live chat to answer their questions about the Affordable Care Act. While our expert panel fielded a range of subjects, the eight topics below came up most often. Our weekly series of live chats will continue Oct. 8 at noon. You also can go here to ask a question or search for more answers.
1. Who can sign up for insurance in the new Marketplaces?
The new health insurance Marketplaces, also known as Exchanges, are mostly for people who buy insurance on their own and for people who don’t have any insurance.
People with COBRA can also shop in their state's Marketplace.
If you have insurance through your employer, you probably don’t have to do anything. But if your insurance costs more than 9.5% of your income or it doesn’t cover an average of 60% of your medical expenses, you can shop for insurance through your state’s Marketplace, and you may qualify for federal tax credits.
2. How do tax credits work?
Tax credits are only available on health plans purchased through the Marketplaces. If you are single and you make less than about $46,000, or if you are a family of four and you make less than about $94,000, you may get a tax credit from the government to help pay your premium.
When you enter your personal information and income, you’ll find out if you're eligible for credits.
Tax credits can be taken in three ways. You can apply it entirely to your premium to pay the lowest possible cost for coverage. You can apply part of it during the year and take the rest at tax time. Or you can pay your full premium throughout the year and use the credit as a deduction at tax time.
3. How is income calculated when you apply for insurance?
The income used to figure out if you are eligible for a subsidy is modified adjusted gross income (MAGI). That means your household income after deductions and other credits. For most people, MAGI will be the same as adjusted gross income, or AGI.
Here’s where you can find your AGI, depending upon the tax form you use:
Form 1040 EZ - Line 4
Form 1040A - Line 22
Form 1040 - Line 38
4. What’s the penalty if I don’t get insurance?
The Affordable Care Act says most Americans must purchase insurance or pay a penalty. If you can afford insurance but don’t buy it, you’ll pay a fine when you file your taxes in 2014. In 2014, you will pay $95 for each adult and $47.50 for each child (up to $285 per family), or 1% of your household income, whichever is greater. Penalties go up in 2015.
You won’t have to pay a fine for not having insurance if:
- The lowest-cost health insurance plan available to you costs more than 8% of your income.
- Your income is low enough that you’re exempt from having to file taxes.
- Your income qualifies you for Medicaid coverage but you live in a state not expanding its Medicaid program under the law.
- You can’t afford coverage because the health insurance a family member is offered at work is too costly and you don’t qualify for a tax subsidy on the Marketplaces.
- You are of American Indian descent.
- You are an undocumented immigrant.
- You are a prisoner.
- You are a member of certain religious sects exempted from having to buy health insurance.
- You are an American living abroad for more than 1 year.