Understanding health insurance let alone the new exchanges is difficult for many people. To add to that complexity is understanding how premiums and the subsidies (tax credits) work. Here is a quick primer.
Do I have to pay the full insurance premium throughout the year and then collect my subsidy at the end of the year?
No, you will have the option of receiving the subsidy in advance and the exchange will forward the subsidy directly to the insurance company you select so your monthly premium will be lower.
How will the exchange know what subsidy I am entitled to?
You will have to supply household income information at the time you apply for coverage?
Is my subsidy guaranteed for the year?
Since the amount of your subsidy (tax credit) is based on your income, if your income varies, so will the credit. Let’s say during a year you work an unexpected amount of overtime or you get a nice raise, that could mean a cut in your subsidy retroactively to the start of the year and you may be required to give money back.
Is it possible I could lose my entire subsidy after the start of the year?
If your household income increases during the year, say your spouse gets a job, it is possible to go from eligibility for a generous subsidy to no subsidy at all (retroactively to the beginning of the year).
Can I avoid the problem of receiving a greater subsidy than I am entitled to?
You can either wait until you file your taxes to claim the subsidy (tax credit) or you can have part of the subsidy applied to your premium and claim the remainder at year end. This will give you a little flexibility in case your earnings change. By the way, if your income is lower than expected, you may receive a larger subsidy at year end.
What happens if I don’t pay my premium on time?
If you are receiving a premium subsidy, you have a 90-day grace period after which your coverage will be terminated. Then you will have to wait until the next annual enrollment period to re-enroll. But remember, if you are without coverage for more than three months, you can be assessed a penalty for not carrying health insurance.
Are there people who are exempt from the requirement to have health insurance ?
According Treasury Department Regulations, the following can receive exemptions (granted by the Exchange or in some cases, the IRS):
• Individuals who cannot afford coverage;
• Taxpayers with income below the filing threshold;
• Members of Indian tribes;
• Individuals who experience short coverage gaps.
• Religious conscience;
• Members of a health care sharing ministry;
• Incarcerated individuals; and
• Individuals who are not lawfully present.
What is a hardship exemption?
Some hardships are defined, but others will be determined on a case by case basis. Here is what the regulations say:
The statute gives HHS authority to exempt individuals determined to “have suffered a hardship with respect to the capability to obtain coverage.” In developing these regulations, HHS considered several particular circumstances that provide good cause to go without coverage. To provide clarity for taxpayers facing these circumstances, the HHS regulations enumerate several situations that will always be treated as constituting a hardship and therefore allow for an exemption. Hardship exemptions include for example:
o Individuals who an Exchange projects will have no offer of affordable coverage; and
o Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility. This rule will protect individuals in states that, pursuant to the Supreme Court decision, decline to expand Medicaid eligibility despite the significant Federal financial incentives to do so.
The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.