On March 23, 2010, the first part of the Patient Protection and Affordable Care Act was passed as part of the first stage of comprehensive health care reform under the Obama administration. The Affordable Care Act is often referred to as “Obamacare”, the “ACA”, or the “PPACA”. The Affordable Care Act refers to the final version of the law, which provides protection and rights for citizens that make health insurance a fairer and more easily understandable concept. Subsidies such as cost-sharing reductions and premium tax credits make health insurance more affordable for the majority of Americans. The Affordable Care Act also expanded the Medicaid program to assist Americans with low-to-moderate income levels.
The Affordable Care Act Health Insurance Penalty
The rules regarding the Affordable Care Act have constantly changed from 2010 to 2019. For the majority of the life of the act, a penalty was issued to people that were not enrolled in health insurance; many Americans found the penalty confusing and unnecessary. For example, for the tax year of 2017, the penalty was either $695 per adult and $347.50 per child, for a maximum of $2,085, or 2.5% of the total adjusted gross income of the household.
Americans were not required to pay the penalty if they were subscribed to a health insurance plan that constituted “minimal essential coverage”; health insurance plans that covered this could have been a government-aided plan such as Medicaid or Medicare, an expatriate plan, an employer-sponsored individual or group health insurance plan, or an individual insurance policy. The individual plans could be purchased off on or the public marketplace.
The 2019 Individual Mandate to the Affordable Care Act
All of this changed in 2019. For the first time, there is no longer a fee associated with a lack of insurance under the Affordable Health Care Act. As of January 1, 2019, the individual mandate that required the majority of American citizens to purchase health insurance or pay a health insurance penalty was repealed. This change is due to the Tax Cuts and Jobs Act, which abolished the penalty.
The Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act was enacted on January 1, 2018, and the changes are slated to continue to take effect until December 31, 2025. Virtually every tax-filing citizen will be effected, as it instates a new tax bracket and tax rate structure. The tax rates are still progressive, meaning that as income increases, tax rates will increase as well. The new tax brackets are slightly lower than previous tax brackets. For example, a person earning $40,000 a year will be responsible for $4,740 under the 22% tax bracket.
- TXJA brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Pre TXJA: brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
The Act also decrees a new $500 refundable credit for dependents (who do not qualify for the child tax credit), as well as other dependents. There are also standard deduction increases, and many itemized deductions have been modified, limited, or eliminated.
Group Retiree Medical Benefits
While there is no longer a penalty for no health insurance, medical insurance and benefits are a necessary component of living a happy and healthy life long into retirement. Benistar is a North American leader that is focused on providing the most reliable and cost-effective medical solutions possible. We design and administer group retiree medical benefits and prescription drug plans for labor unions, public and privately-held companies, city, county, and government entities, educational organizations, and religious organizations. With over 1,300 plan sponsors administered nationwide, we are your go-to for medical benefits. To learn more, visit our contact page or call us at 1-(800)-236-4782.
The attached above regulatory summary and tax information are provided for informational purposes only. Plan Sponsors should consult with their own tax and legal advisors.