Looking Forward to the Affordable Care Act

Matt Shelly
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The Affordable Healthcare Act, also known as Obamacare, is the US federal statute designed to regulate the country's healthcare system. While the statute obviously affects the medical industry, it also impacts the accounting industry. Many accounting firms have had trouble helping their clients understand how the Affordable Healthcare Act affects them. With 2014 only a few months away, it's important that you understand the requirements of the Affordable Healthcare Act so that you can give your clients appropriate advice throughout the upcoming year.

The provisions of the new Affordable Healthcare Act state that people who don't have medical insurance provided by their employers are obligated to purchase minimum essential health insurance coverage. If an individual decides not to purchase the coverage, he or she is required to pay a penalty—known as a shared responsibility payment—to the IRS. The shared responsibility payments begin when you file your clients' 2014 taxes and increase over the next few years, so it's important that you know how much money each of your clients has to pay.

  • In 2014, the penalty for not carrying minimum essential health insurance is either $95 per person or 1 percent of income—whichever is greater.
  • The amount of the penalty increases in 2015 to $325 per person or 2 percent of income.
  • In 2016, the penalty payment increases again, and your clients will have to pay $695 per person or 2.5 percent of income—whichever is greater—if they still choose not to carry minimum essential health insurance.
  • After 2016, it's still important that you verify the penalty amounts, but the amount will only increase due to inflation.
  • Someone who only lacks insurance coverage for part of the year is only responsible for paying a portion of the fine.

A few instances exist where the shared responsibility payment is waived: if a person lacked health insurance coverage for less than ninety days, if a person's income is too low to file taxes, and if a person would have to pay more than 8 percent of any income to pay for minimum essential health insurance.

Lastly, the new obligations required by the Affordable Healthcare Act prompted the IRS to give low- and middle-income individuals a credit when they purchase health insurance. Anyone who purchases health insurance on the new federal and state exchanges, and makes up to 400 percent of the poverty level, qualifies for the credit to help offset the cost of the health insurance.

Accountants also need to know how the Affordable Healthcare Act affects employers. New information reporting requirements for employers will affect how accountants work, including

  • Employers with fifty or more employees are required to provide minimum essential coverage or pay a $2,000 fine per employee—less the first thirty employees
  • All employers submitting more than 250 W-2 forms are required to disclose the total cost of the health insurance paid on the W-2 form
  • Employers and health insurance providers are required to report the status of health insurance coverage to the IRS and provide a written statement of coverage to covered individuals
  • Companies are required to report enrollment counts to the IRS by November 15 each year

Also, if your clients are business owners, it's important that you help them forecast budgets for changes that will take place because of the Affordable Healthcare Act. In addition to reporting responsibilities, employers are responsible for two fees: the Patient-Centered Outcomes Research Institute Fee and the Transitional Reinsurance Fee.

Because there are so many changes that come with regulating the country's healthcare system, it's important that accountants continue to look toward the future and plan for the changes to come. Your clients rely on you to ensure they comply with the regulations of the Affordable Healthcare Act, so it's important that you stay on top of any changes that are made.


(Photo courtesy of freedigitalphotos.net)


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