There seems to be no question that the Affordable Care Act (ACA) or Obamacare is going to take effect. It is not going to be repealed and it is not going to be defunded either. I could be wrong but I believe Congress is slightly too dysfunctional to make any major moves let alone repealing or defunding Obamacare. The public opinion surveys consistently indicate that the majority of Americans don’t necessarily like Obamacare but they like much of what Obamacare does. I went over many of the good features of Obamacare last week. What Americans don’t seem to like is, regardless of the rhetoric from the Washington bureaucrats, the blunt fact is that the federal government will be running the entire health care system at some point in the future. Appointed administrative staff has issued thousands of pages of regulations and rulings that have the authority of law. This myriad of regulations and rulings to implement Obamacare just doesn’t set well with many Americans. In my wildest dreams, I couldn’t imagine that an appointed person such as Kathryn Sebelius, the Secretary of Health and Human Services, could be practically as well known and have as much power as the president, but such is the bureaucratic environment in which we all live right now. We may rue the day that Obamacare passed because of the regulatory environment it will build but we may celebrate the day that Obamacare passed because of the good things that it does. Only time will tell.
For many, the best feature of Obamacare is entitled the “individual mandate”. Presently there are thirty to forty million individuals without health insurance. As of October 1, 2013 all taxpayers, including those thirty to forty million non-covered individuals, will be able to enroll in a plan that is typically offered in a state exchange. The coverage will begin January 1, 2014. Those individuals who choose to not participate and do not buy insurance may be subject to a penalty which would be payable as part of their tax return. The specific rules of when the penalty will apply and how it will be collected are a bit murky at this moment but I am sure they will be clarified in the not too distant future. If the penalty is applied in 2014, an individual may be assessed $95 and a family may be assessed a penalty of $285. In no event can the penalty exceed 1% of the individual or family income. In 2015, the penalty will increase to $325 per individual or $975 per family with a maximum of 2% of income. In 2016, the penalty will be $695 or $2,085 per family with a maximum of 2.5% of income. People who can’t afford the insurance but can’t afford the penalty for not having the insurance may be eligible to receive a tax credit to offset the premium. The premium credit will act to reduce the amount of premium paid out of pocket. The credit will reduce as income goes up so that for a single person earning up to $11,170 or a family of four with income up to $23,050 will not pay more than 2% of that income for insurance. The percentage of income paid for the premium increases as the individual or family’s income increases. For example, an individual with income of $22,340 or a family with income of $46,100 will not pay more than 6.3% for their premium while an individual with income of $44,680 or a family of four earning $92,200 will not pay more than 9.5% of income. It appears that in no event will insurance be considered “affordable” if the premium paid would be more than 9.5% of income. The preliminary instructions imply that the credit will be calculated when the individual or family enrolls in the program. The individual or family will be directly billed for their portion and the tax credit portion will be paid by the federal government direct to the insurance company.
There are many people who were exempted from the individual mandate in the original bill or have applied and received a waiver. This list seems to be growing daily as the waiver request program is in full swing. Currently, a partial list of those exempt from the mandate include: members of recognized religious sects that are exempt from self-employment tax, members of health care sharing ministries, most incarcerated individuals, members of Indian tribes, individuals who are not required to file an income tax return, and individuals who have received a hardship exemption. I have a feeling that should the “exempt” list reach the thirty to forty million mark; the level of unhappiness with Obamacare will also increase. After all, many of those on the exempt list are the people who were without insurance and, by being granted exempt status; they will remain off the insurance rolls. The picture should become clearer as time passes and it appears that we will all just wait for that to happen. This is Jerry Coon signing off.
Jerry Coon is an Enrolled Agent and
a Registered Tax Return Preparer.
He owns Action Tax Service on
Northland Dr. in Rockford.
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