Another year has gone by and I have been delaying this as long as I dared to get as much information as possible together on the Affordable Care Act, commonly called Obamacare, as this may affect you or it will affect someone you know for sure. As I predicted last year, ACA survived all legal actions to terminate it. This occurred because the defense changed the justification for ACA from a commerce bill which was used to pass the law to a tax bill and, since the passage of the Thirteenth Amendment, the federal government can create any tax it desires.
ACA: What You Need To Know
There is no reason to overly stress about this law unless you are one of the people who have no desire for coverage and or you have to pay for it. In fact, the majority who will buy insurance through an exchange will actually have no out-of-pocket premiums after tax credits are taken into account. The basics are as follows:
- Only religious orders exempt from Social Security taxes are exempt from ACA; all rumors that contradict this are bogus. Ministers using exemptions from SS are not exempt from ACA.
- In order to avoid penalties you must have coverage for 9 out of 12 months so you have plenty of time to get coverage. The exchange is open until March 21, 2014, and reopens in November if you qualify for tax credits.
- Only employers with more than 50 full-time workers (“full time” meaning 32 hours a week) must provide coverage, thus no one I am sending this letter to who is an employer needs to worry about providing health insurance benefits.
- Most important to note is that the tax credits for premiums are only available for those who buy insurance through the approved exchange for their home state; in Maine, that is www.healthcare.gov. DO NOT fall for any scam telling you another site or that an agent can do this for you when you buy insurance through them. You must apply only online and buy your coverage online at the exchange; there are NO EXCEPTIONS if you want the tax credits.
- Next, if you have Medicare or Medicaid, you do not need to get coverage, nor do you need coverage if, after tax credits, the premium exceeds 9.5% of your total annual income.
Employer Coverage
If your employer offers coverage: Whether you accept coverage or not, you are not eligible for tax credits unless the out-of-pocket premium exceeds 9.5% of your gross income for your coverage only. So if you have family coverage and the premium exceeds 9.5% that does not count; only your portion for you alone counts towards this. Thus if your employer offers coverage you have to take coverage there or pay 100% of your premium from other sources. Your family may qualify to have tax credits for their coverage through an exchange. Also, Maine elected to have a surcharge for smokers; this surcharge must be paid for from your pocket—no tax credits, and there is or will soon be testing for tobacco usage for all who receive tax credits. As a note it there is no testing planned for drugs—so, crack users, you are fine; continuing smoking away.
ACA Plans in Maine
In Maine, ACA is available for the Bronze, Silver, and Gold plans only. As stated above, many people will have to pay no premiums if they choose the Bronze plan after tax credits. At the Silver and Gold there is a personal cost and if you smoke there is a cost at all levels. The Kaiser Institute has what I think is the best free estimator available to the public at: http://www.kff.org/interactive/subsidy-calculator
Unfortunately, you will have to apply online to get the final numbers and it is quite a process. For those that are interested I will do the process for you but the cost will be $125.00. I have done three applications to date for people who all are supposed to receive tax credits that cover 100% of the Bronze-level plan. While proponents of ACA would hail this as great news I see this as a 100% waste of tax dollars. The credits ranged from a low of just over $9,000 to a high just under $17,000. None of these people have seen a doctor for a need in years but now an insurer will get paid. Each of these families would have been far better served with lower taxes and, for example, a voucher for free shots and a physical—which, on these three cases, would have cost less than $5,000. My results may not be typical but from other preparers I know and from articles I am reading this so far this seems to be common.
Affordability
The Affordable Care Act is actually anything but affordable. With a $6,250 deductible on the Bronze plan, which is now subject to change based upon insurer losses, no one who needs the tax credits can afford to be ill. During the 2012 tax season I had papers out for applying for charity care at St. Joseph Hospital and Eastern Maine Medical Center. If you do not qualify for MaineCare you may still qualify for free or reduced coverage through the hospital and all hospitals in Maine must offer this so do not be afraid to ask for the paper work.
I have done my homework and for those that qualify and do not want health insurance there is an option. There are religious co-ops that offer health expense plans that are not insurance but faith-based payment-assistance plans. To date I have not found any complaints against them and in fact they seem to be well-respected. The “premiums” and terms are different under all of them and only those established before December 31, 1999 qualify. There are several of them but I chose the following for ease of understanding their Web sites and terms of plans. They are:
The latter is by far the cheapest and best suited for those who are just trying to comply with the law. Note that none of these are insurance; they are associations exempt from the requirements of ACA and will not pay for many items required by ACA and unless the others who are members pay there is no way to enforce action or any regulatory agency to file a complaint with that has jurisdiction. The premiums are also not deductible for those who qualify to deduct premiums. However with their histories and costs they may be a far better option for many of you. Note I do not actually endorse any of these programs or any health insurer; I am just trying to show you options.
SELF-EMPLOYED
Corporation Benefits
For those who are self-employed this may be the best time ever to become incorporated especially if you can cut your actual need for wages. With lower income you have a greater chance for tax credits and free care; and, best of all with a C-corporation, we can add a statement of coverage that allows the company to pay 100% of the out-of-pocket expenses at no cost to you. The company can also establish an HRA which would allow you to qualify for tax credits even if normally your income is too high and still have the business pay for the premiums.
Tax Matters
On tax matters, little has changed for 2013 over 2012, but major changes are in store for 2014. Capital gain taxes will be changing hard and fast, so if you have a profit in something you may wish to book that gain now. If your income is over $120,000, expect an additional 3% penalty tax on amounts over $120,000; the exact formula is not yet completed but 3% should be a safe estimate. This should be the end of 179 and bonus depreciation deductions over $25,000, so if you have a need for a major piece of equipment and deduction, you do not have much time to go.
For my woods clients: Maine has finally approved sales-tax exception for woods equipment, giving you the same privileges enjoyed by fishermen and farmers. Visit www.maine.gov/revenue and look for your sales-tax exemption application and file it.
As always, please call anytime.