By now, we have all been inundated with stories about the Affordable Care Act and how health care will dramatically change as a result. How does this impact each American financially, though?
Starting this year, when you file your personal tax return, you will need to attest to whether you have health insurance coverage. If you do not have coverage, you will pay a fine. As a student, you are likely still covered by your parents’ health insurance policy, so they will bear this burden for a few more years (until you reach age 26). If you are a student over the age of 26, you should have already visited your state health care exchange, an individual health insurance company’s website (such as Blue Cross Blue Shield) or healthcare.gov/choose-a-plan/ to see your options.
If you are filing your own tax return and you are no longer covered by your parents’ insurance, you will need to report coverage on your 2014 tax return. Every individual must have health care coverage, qualify for an exemption from coverage or pay the fee with their tax return. If you bought insurance through the government marketplace, you should have received a Form 1095-A from the marketplace showing your coverage information. You will need this to prepare your tax return, especially if you qualify for a premium tax credit.
The premium tax credit is essentially a subsidy from the government if your income is below a certain level. You can EITHER get an upfront deduction in premiums when you sign up for coverage in the marketplace OR claim the credit on your tax return. If you choose not to have health coverage for a year, you are required to pay a penalty fee. The fee, called a “shared responsibility payment,” is the HIGHER of 1% of your yearly household income or $95/person for the year. For 2015, this fee goes up to 2% of your yearly household income or $325/person per year.
The ACA is complex and its tax consequences are far-reaching, so it is important to understand the basics, especially if you prepare your own tax return!
For more on preparing your taxes, read this post.
~Megan Mathers, JD, Mathers Law
Great article! Thank you for addressing this issue.
There seems to be a big hole in the ACA though. In Idaho, where I’m from, you have to meet a certain income requirement, of about $20,000. Well, if you’re below that, you can’t get the tax credit. So, I’m a non working dental student, making far less than $20,000/year, and left to either get on Medicaid (because I have a child), which is a hard pill to swallow if you don’t want to be on government assistance, or pay full price for insurance. I’m twenty six as well, so can’t be on parents insurance, even if they had it. So Megan, do you have any more information for people like me, or advice? Thanks again for the article.
Hi Brent,
The use of the credit does have income requirements and each state will vary because each state has different offerings on their exchange. Unfortunately, there is no one uniform answer. It does seem that Medicaid or full price insurance may be your only option if your school does not provide any options for insurance. Medicaid is supposed to step in where the ACA doesn’t reach (below 139% of the federal poverty level in Idaho) so that would usually be my recommendation. Some states offer catastrophic only plans, which can be more reasonably priced, but with a child, I know this isn’t probably a good option because children need to go to the doctor more often than most people in their 20s.
I would suggest contacting a private insurance company or a counselor through school, if at least to talk to someone about the possibilities that may be available in Idaho that you’re not aware of.
Cool, thanks for getting back with me. I’ve also read a couple of your other articles (wow you’ve written 28), and just wanted to say thank you for your contributions here to ASDA. Very good info.
Thanks for reading, Brent! Megan writes all of our Money Monday posts. She’s a great asset to the Mouthing Off team because she’s a financial expert who works with dentists on a daily basis. I’m glad you’re enjoying her posts!
-Kim Kelly, ASDA publications manager