It’s hard to believe it has been just about a year since the Affordable Care Act officially rolled out. Between technology issues from healthcare.gov and confusing plans, it was tough for many Americans signing up to truly understand the health care coverage. But one year later, many of those issues have been resolved and the next “enrollment period” for 2015 runs November 15th through February 15th, 2015.
What You Pay for Going Uninsured
If you are not covered under an employer plan and you do not sign up for coverage on the “exchange”, you will face a penalty for not carrying insurance. In 2014, the “fine” for not having insurance was 1% of income or $95/person, whichever was greater (for most, it was the 1% of income). Effective 2015, that penalty will increase to 2% or $325/person, whichever is greater. As the years progress, the penalties for not having insurance will increase as our government attempts to dramatically reduce the amount of uninsured individuals in the country.
Could You Reduce Your Monthly Premiums?
If your income is within certain parameters based on the number of people in your household, you could qualify for subsidies that could potentially reduce your monthly insurance premiums or provide for a free care period. This link to healthcare.gov shows those qualifying ranges. At The Center, we have identified this as a planning opportunity for certain families and individuals, especially those who are retired but not yet age 65 and Medicare eligible. By coordinating with a client’s CPA and doing some proactive tax planning, income can be drawn from certain accounts to keep your adjusted gross income (AGI) as low as possible to potentially qualify for a reduced insurance premium (drawing income from taxable accounts instead of IRAs, deferring Social Security, etc.) … potentially saving thousands each year.
Including Adult Children on a Plan
It’s also worth mentioning that children can stay on their parent’s insurance plan up to age 26 – even if the child is still attending school, married, not living at home, not financially dependent on their parents and eligible to enroll in their own employer’s plan. Often times, coverage is much cheaper for the parent to have the “child” on their plan as opposed to the child actually obtaining coverage on their own. We’ve seen some clients have their kids pay them the cost of maintaining them on their plan so the child is still contributing to their coverage, but at a much more reasonable rate that usually offers more comprehensive coverage in general.
As you can see, there are many things to consider with the new health care changes. Since the Affordable Care Act has been around for almost a year now, hopefully more and more folks are becoming familiar with those changes. Although we are not insurance experts, we can still give you some insight on your coverage. Please don’t hesitate to contact us if you have any questions or would like to dive deeper into your personal financial situation.
Nick Defenthaler, CFP® is a Certified Financial Planner™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C14-034475