Even though HEAL California would vastly prefer a Medicare for All-type system, we want to help everyone understand how the Affordable Care Act plays in to their income taxes.
We’ve talked about Form 1095 Alphabet Soup which not only proves to the IRS that you had health insurance, but also identifies exactly which months you had it. (Really? Down to the month?)
We’ve talked about the exemptions to having to buy health insurance, which apply to a number of people, most notably the extremely poor, the undocumented, the incarcerated and members of certain religious sects.
We’ve also discussed the penalties for not having insurance, the complexity of the calculation and the ever-increasing fines.
Now we move on to another issue – minimum essential coverage.
- Did you know that you could have insurance but get fined anyway? That’s because the health insurance you buy has to be of a certain quality. If you have crummy health insurance – that is, insurance that doesn’t meet the “minimum essential coverage” standards in the ACA – you can be subject to a financial penalty.
Many people would like to fulfill the mandate of the ACA by purchasing the cheapest health insurance they can. For example, a woman who doesn’t plan to give birth to a child might not care to purchase maternity coverage because she will never use it. Insurance that excludes certain coverages would be cheaper.
But maternity coverage is one of the ten essential coverages that “ACA-compliant” health insurance must have. If you buy a policy that doesn’t include maternity coverage, it doesn’t count!
Of course, if we had universal healthcare, Medicare for All, none of this would be an issue because everybody could have the broadest possible coverage at the lowest possible price. But until we do, you need to think about –
The Quality of Your Insurance – Minimum Essential Coverage
Ten minimum essential coveragess are mandated by the Affordable Care Act, and insurance policies that include these coverages are called “ACA-compliant”:
Laboratory Services
Emergency Services
Prescription Drugs
Mental Health & Substance Use Disorder Services
Maternity & Newborn Care
Pediatric Services (including Oral & Vision Care)
Rehabilitative & Habilitative Services & Devices
Ambulatory Patient Services
Preventive & Wellness Services, & Chronic Disease Management
Hospitalization
In all honesty, aren’t these the kinds of services that we would expect health insurance to cover? But when it comes to health insurance, we can’t take anything for granted!
Before the Affordable Care Act the health insurance industry had virtually free rein to limit the coverage they provided. Here is an excellent article with true stories of how cruelly the health insurance industry treated sick people just a few short years ago: Health Insurance Company Abuses: How the Relentless Drive for Profit Endangers Americans.
Because of the ACA, health insurance companies may no longer include pre-existing condition exclusions in policies, or rescind coverage if the insured (you!) gets sick. Plus, their policies must be guaranteed issue during open enrollment (which usually runs from 11/1 to 1/31). That means, if you pay for a policy, they must give it to you no matter how sick you are – during open enrollment, that is. And, the insurance companies must spend at least 80% of their premiums on actual healthcare.
All this is necessary because in spite of their PR spin, the only way the health insurance companies will truly take care of us is if they are compelled to do so. Otherwise, they are thrilled to sell us ultra-profitable (to them) “skimpy” policies. And a lot of people thought they liked those “skimpy” policies with their “skimpy” premiums. But if they ever got really sick and needed to be hospitalized, they would be in big financial trouble.
So by establishing minimum coverage standards, the ACA took a step in the right direction. The safest solution, of course, is to cover everybody for everything rather than trying to guess what one person might need and just buy insurance for that. And by pooling the risk (including everyone in the country for coverage), the costs would be as low as possible.
But that’s NOT what we have. The ACA didn’t take us that far. Since we have hundreds of insurance companies and thousands of insurance policies, you must be aware whether your policy is ACA-compliant.
Luckily, most insurance policies today are ACA-compliant. Here’s a handy list from Covered California that lists the kinds of insurance policies that are compliant:
- Employer-sponsored coverage (including coverage through the Consolidated Omnibus Budget Reconciliation Act of 1985 [COBRA] and retiree coverage).
- Coverage purchased in the individual market, including a qualified health plan offered by Covered California.
- Medicare Part A coverage and Medicare Advantage plans.
- Full-scope Medi-Cal coverage.
- Children’s Health Insurance Program (CHIP) coverage.
- Certain types of veterans’ health coverage administered by the U.S. Department of Veterans Affairs.
- Certain types of TRICARE coverage administered by the U.S. Department of Defense.
- Coverage provided to Peace Corps volunteers.
- Coverage under the Nonappropriated Fund Health Benefit Program.
- Coverage through the Refugee Medical Assistance program supported by the Administration for Children and Families.
- Coverage through a student health plan.
- Coverage through most state high-risk pools.
- Certain other coverages designated as minimum essential coverage by the U.S. Department of Health and Human Services.
Here’s more information from the IRS, including types of insurance that do not meet the minimum-essential-coverage standard.
Note that some employer provided plans are non-compliant, but only if they are “grandfathered” or “grandmothered.” Click here for a great article from healthinsurance.org with more information on these kinds of plans. You will not be penalized if you have a legitimate grandfathered or grandmothered plan, but there are fewer and fewer of them in force.
So be safe and check! You can see if your insurance is included on the list from Covered California (above) or ask your insurance agent, your boss or your Benefits Manager whether your health insurance is ACA-compliant. Not only could it save you the cost of a financial penalty, it could save your life!
Just a thought from the HEAL Team:
It’s a real shame that the private health insurance companies still play such a major role in our health care. They have entirely the wrong set of priorities. They want to make money for their shareholders, and they can only do that by NOT spending our premiums on our care. Here’s a link to more information about how health insurers make money.
Before the Affordable Care Act, the insurance companies refused to cover people who were sick, or cancelled insurance for people if they happened to get sick. Can you imagine getting a breast cancer diagnosis and then an insurance cancellation? It was so terrible the Obama administration imposed the “minimum essential coverage” standards. But they still left the insurance companies in place. Talk about leaving the fox guarding the hen house!
If you agree with us that health care should be universal, high quality, easy and affordable, instead of a hassle, join us. Together, we will win!
(Sorry, we have to make this disclaimer because we’re not attorneys or income tax specialists or anything like that.)
HEAL California makes no representations or warranties in relation to the information provided here, which we obtained from the IRS, TurboTax and other sources (see links, above). We at HEAL California are neither tax nor health insurance professionals. If you have any specific questions about your taxes or health insurance, you should consult a qualified tax professional and/or a licensed insurance agent.
Following are outstanding resources that we highly recommend if you need more information:
IRS: The-Individual-Shared-Responsibility-Provision
IRS: ACA-Individual-Shared-Responsibility-Provision-Calculating-the-Payment
And here are resources for help doing your income taxes, which could be free (depending on your income):
IRS: Free-Tax-Return-Preparation-for-You-by-Volunteers
Also, several income tax services allow you to use their online programs to file easy returns, if you search online for “free income tax help.” There may be more resources in your community, too!