While the battle over Affordable Care Act (ACA) also known as Obama Care continues in Washington, folks like you and me are facing the reality of high out-of-pocket costs and rising monthly premiums that have well surpassed affordable. But there re some secrets buried in the Affordable Care Act that can save you money and help you avoid penalties.
If you don’t have a health insurance plan available to you through an employer, you most likely went on the Health Insurance Marketplace (aka “The Exchange”) to find coverage.
Some people discovered that, because of their income level or one of several other factors, they were eligible for an Advance Premium Tax Credit (aka premium subsidy). These premium subsidies were designed to make the health care purchased on the Exchange more affordable through a credit that reduces monthly premiums for people falling into prescribed categories.
It’s important to know that those who are eligible for premium subsidies may have their subsidy modified or revoked if their situation change, e.g. income increases during the plan year. Because remember, an Advance Premium Tax Credit is just that, a credit not a waiver. Any ineligible credit amount a person receives in a plan year will be repayable at income tax time the following year.
However, many thousands of people are not eligible to receive a premium subsidy. They are faced with the less than attractive choices of paying high monthly premiums, taking a policy with very high out-of-pocket costs or, in some cases, opting not to have any health care protection at all.
If you are not participating in a qualified health care plan you’re leaving yourself open on two fronts: you will have no insurance assistance should you incur medical costs and you will be subject to the Individual Mandate Penalty.
Individual Mandate Penalty
The Individual Mandate Penalty for not having health coverage in 2017 is the greater of $695 for each adult person on your tax return who isn’t covered ($347.50 per child) or 2.5% of your household income.
ACA Exemptions That Can Save You from Penalties (the secrets I promised)
You may be eligible for one of several qualifying exemptions that will excuse you from paying the Individual Mandate Penalty even though you are not participating in an Exchange or any other type of health care plan.
- Exemptions are available based on a number of circumstances, including certain hardships, some life events, health coverage or financial status, and membership in some groups. [i]
- You don’t have to pay the penalty fee for any month you have qualifying health coverage. If you’re uncovered only 1 or 2 months, you don’t have to pay the penalty fee for any month.
The Group Membership Exemption
Taking advantage of the Group Membership Exemption is one way to both avoid the penalty and receive help with medical expenses.
You may be able to qualify for a Group Membership Exemptions if you’re a member of:
- A federally recognized tribe or eligible for services through an Indian Health Services provider
- A recognized health care sharing ministry
- A recognized religious sect with religious objections to insurance, including Social Security and Medicare[ii]
Health Care Sharing Ministries Enroll 12-Months of the Year
Insurance companies are not the only game in town to purchase health care. One of the more popular ways to avoid ACA penalties and receive help with medical costs is to join an ACA exempt Health Care Sharing Ministry (HCSM).
Enrollment in a Health Care Share Ministry can occur any month of the year and the cost of these options are usually much lower than unsubsidized Exchange insurance plans. [Please note that these expense sharing programs are not insurance.]
An HCSM is an escrow agent that administers the voluntary sharing of health care needs for qualifying members. The membership is based on the altruistic traditions of mutual aid, neighborly assistance, and burden sharing.
Each HCSM uses different systems to either pay directly to providers or reimburse members for eligible expenses.
Two of the common underpinnings of a Health Care Sharing Ministries are that
- Members share a common set of ethical, spiritual or religious beliefs (some HCSMs are non-denominational or have a statement of common beliefs that are personal rights/liberty oriented); and
- Members share medical expenses in accordance with those beliefs, even after a member develops a medical condition
Health Care Sharing Ministries Are NOT Insurance
Even though a state insurance license is needed to sell Health Care Sharing Ministry options, they are not insurance. Therefore, they do not make an insurance guarantee or ensure that you will receive benefits. The members simply commit to paying for each other’s medical costs by contributing a fixed monthly “share amount”.
HCSM’s even use different terminology from insurance when referring to their health care options so members understand that it is not insurance.
- Instead of insurance, HCSM members are participating in medical cost sharing
- Members don’t’ send a monthly fee, payment, or premium, they contribute a share amount
- HCSMs don’t pay claims, they share medical expenses or meet needs
- HCSMs don’t have reserves, the Sharing Members retain their own resources as self-pay patients
- There are no Benefit outlines, HCSM’s follow sharing guidelines
- There is no deductible, instead, there is an annual member responsibility or unshared amount
- HCSM don’t say you’re covered for a medical expense, they say that the medical expense is “eligible for sharing”
- HCSMs don’t have plans, they have health care options
What Type of Health Care Option Might Be Right For You?
The first thing to do in determining which type of health care option is right for you is to prioritize what is most important to you. Is it monthly cost, covering pre-existing conditions, enrolling outside of the open enrollment period, or avoiding the Individual Mandate Penalty?
If monthly cost is the most important factor, you should first determine if you are eligible for an Advance Premium Tax Credit (aka premium subsidy) by using this link to the Healthcare.Gov website.
If you do qualify for a premium subsidy, a Health Insurance Marketplace insurance plan will probably be the most cost-effective for you.
If you have a pre-existing condition or have lots of prescriptions, then a Health Insurance Marketplace insurance plan would be the best option. It is the only type of coverage that will accept pre-existing conditions on day one with no waiting period.
If enrolling mid-year (if you don’t qualify for ACA enrollment outside the annual open enrollment period) and/or avoiding the tax penalty is most important to you, choose a Health Care Sharing Ministry option that qualifies for a penalty exemption, or determine if you qualify for a penalty exemption under one of the other penalty exemption categories, such as the Affordability Hardship exemption.
You can start your search for possible penalty exemptions by using this link to the HealthCare.gov website.
Always be sure to seek advice from a qualified tax professional before assuming you qualify for any penalty exemption.
What to Consider When Choosing a Health Care Sharing Ministry
Not all HCSM’s are created equal. Make sure you carefully research options before signing on. A licensed insurance professional who understands Health Care Sharing Ministry options can help you compare options and costs.
Some of the things to consider when choosing a Health Care Sharing Ministry option are:
- Is the Heath Care Sharing Ministry recognized under ACA rules?[iii]
- Are you aligned philosophically and/or spiritually with the HCSM?
- How many of the Minimal Essential Coverage (MEC) preventative care benefits are included?[iv]
- Are doctor visits included? If so, is there a limit?
- What are the personal responsibility limits? (the part of medical costs you pay)
- What are the pre-existing condition and maternity benefit waiting periods or other exclusions?
- Is a hospitalization option included or available?
- What are the per incident and lifetime maximums?
- What provider network is used?
- What is the protocol for making appointments and receiving care?
- Are prescription discounts available?
- Besides the monthly member contributions, are there any other one-time or recurring fees?
Additional lifestyle rules may apply depending on the Heath Care Sharing Ministry, including not using tobacco or illegal drugs and limiting alcohol consumption. Also, shared medical expenses may not be available for certain procedures as outlined in the Heath Care Sharing Ministry’s sharing guidelines. Be sure to review them carefully.
Other Types of Health Care Plans
In addition to insurance plans and Health Care Sharing options, there are a number of other types of plans available for individuals and employer groups that are designed to help with health care costs, including short-term medical plans, fixed-benefit medical indemnity plans, minimal essential coverage (MEC) plans, and special plans such as accident, critical illness, cancer, hospitalization, dental and vision plans.
A licensed insurance professional can help you make an informed decision when choosing the health care protection that is right for you, your family or your employees.
[iii] For employer groups, ask if the HCSM option is recognized as an ACA Qualified Health Plan
Additional source: www.healthcare.gov; https://resources.ehealthinsurance.com
Judy Bezler, Speaker, author, insurance professional and benefit strategist, helps individuals, families and employer groups with their insurance benefit strategies. She is licensed to serve you in North Carolina and South Carolina. Reach her at firstname.lastname@example.org, (704) 559-9323 or www.linkedin.com/in/judybezler.