By Maria Karlsson
The Patient Protection and Affordable Care Act, nicknamed Obamacare, went into effect on Jan. 1, 2014. The law was designed to allow U.S. citizens (even individuals with pre-existing medical conditions) the chance to get health insurance and lower the number of uninsured people in the U.S.
However, I have come across crew who still don’t know what Obamacare is and how it affects them. Obamacare forces U.S. citizens to do one of three things:
Obamacare remains a work in progress and is constantly evolving. Three big changes for 2016 include an increase in the penalty for individuals who do not have coverage, the requirement that employers provide coverage, and an increase in premiums from insurance companies.
The first big change will be most noticeable for people who remain uninsured, as the penalty for the individual requirement will increase drastically.
In 2014, U.S. citizens who didn’t have health insurance paid the greater of $95 or 1 percent of their Modified Adjusted Gross Income (MAGI).
In 2015, that rose to the greater of $325 or 2 percent of MAGI.
In 2016, the uninsured can expect to pay the greater of $695 or 2.5 percent of MAGI. For a family, that could be more than $2,000.
Even so, that penalty will likely still be half of the annual cost of a mid-range plan. Some people facing the penalty avoid it by owing money to the IRS at the end of the year. Since the IRS can’t garnish wages or seize property to collect the penalty, it typically deducts it from any tax refund. If no refund is due, the IRS has little it can do other than take the case (and probably millions of other people’s cases) to court.
The second big change next year is that the employer mandate goes into full effect. Under the employer mandate, businesses must provide health insurance coverage options to full-time employees and their children up to age 26. These options have to cover at least 60 percent of total allowable medical costs.
Furthermore if the cost of health insurance premiums exceeds 9.5 percent of a full-time employees’ MAGI, then the business is responsible for the difference.
In 2015, large companies with more than 100 full-time employees were required to offer at least 70 percent of their health insurance coverage. In 2016, they must offer 95 percent. Mid-size businesses of 50-99 full time employees will also be required to provide coverage to 95 percent of the qualifying employees. Businesses with fewer than 50 full-time employees will still be exempt from Obamacare penalties, and so are part-time employees working less than 30 hours a week.
The final and perhaps biggest impact of Obamacare for 2016 is that insurance companies are initiating their highest premium rate increases since the law went into effect. According to data compiled by the Washington Examiner, the number of policies with double-digit rate increases nearly doubled from 2015 to 2016.
So what qualifies as compliant coverage?
According to the IRS.gov Web site, “Qualifying coverage includes coverage provided by your employer, health insurance you purchase in the Health Insurance Marketplace, most government-sponsored coverage, and coverage you purchase directly from an insurance company. However, qualifying coverage does not include coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage that only covers a specific disease or condition.”
Plans and prices for 2016 will be available for preview the third week of October 2015. Other important dates:
Nov. 1: Open enrollment in the government-sponsored health insurance marketplace begins. Coverage can start as soon as Jan. 1, 2016.
Dec. 15: Last day to enroll in or change plans for new coverage to start Jan. 1, 2016.
Jan. 15: Last day to enroll in or change plans for new coverage to start Feb. 1, 2016.
Jan. 31: Open enrollment closes. Enrollments or changes take effect March 1, 2016.
It’s important for U.S. crew to be prepared. Do some homework and participate in open enrollment. Contact an accountant to discuss any tax implications, penalties or exemptions. And reach out to an insurance broker to learn what options are available.
2016 will be the first year where we discover exactly how affordable the Affordable Care Act really is. The fear among insurance companies and medical providers is that consumers will be so strained by the cost of premiums that they may not be able to afford the out-of-pocket costs (deductibles, co-insurance) required by the plan.
But remember, it’s always better to have some coverage than none at all.
Maria Karlsson is president of Superyacht Insurance Group (SYIG) and provides insurance solutions for crew (individuals and group) and yachts (hull, P&I). Contact her through www.syig.co.