Jan 11, 2023

The Affordable Care Act: A Review and Update

The ACA is more than a decade old and still very much in force. It's often taken for granted today, but everyone could use a reminder of what it does and its regular changes.

As explained on the official government health care site, the law has three goals:

• Make affordable health insurance available to more people. The law provides consumers with subsidies ("premium tax credits") that lower costs for households with incomes between 100% and 400% of the federal poverty level.
• Expand the Medicaid program to cover all adults with income below 138% of the FPL. (Not all states have expanded their Medicaid programs.)
• Support innovative medical-care delivery methods designed to lower the costs of health care generally.

The law affects both individuals and companies. For example, according to Healthcare.gov, the law:

• Requires insurance plans to cover people with preexisting health conditions, including pregnancy, without charging more.
• Provides free preventive care.
• Gives young adults more coverage options.
• Ends lifetime and yearly dollar limits on coverage of essential health benefits.
• Helps you understand the coverage you're getting.
• Holds insurance companies accountable for rate increases.
• Makes it illegal for health insurance companies to cancel your health insurance just because you get sick.
• Protects your choice of doctors.
• Protects you from employer retaliation.

Business rules and benefits

As noted on the IRS site, small companies — typically those with fewer than 50 employees — can purchase insurance through the Small Business Health Options Program.

Such companies:

• Must withhold and report an additional 0.9% on employee wages or compensation that exceeds $200,000.
• May be required to report the value of the health insurance coverage they provided to each employee on his or her Form W-2.
• Must file an annual return reporting certain information for each employee they cover if they provide self-insured health coverage to their employees.

Companies may be eligible for the Small Business Health Care Tax Credit if they cover at least 50% of their full-time employees' premium costs and have fewer than 25 full-time equivalent employees.

Larger employees, based on their size, may also be able to purchase insurance through SHOP. And they must either offer affordable minimum essential coverage that provides minimum value to their full-time employees (and offer coverage to the full-time employees' dependents) or potentially owe an employer shared responsibility payment.

The latest updates

In mid-2022, the IRS announced annual adjustments to the ACA. According to the Society for Human Resource Management, the "2023 health plan affordability threshold—used to determine if an employer's lowest-premium health plan meets the Affordable Care Act's (ACA's) affordability requirement—will be 9.12 percent of an employee's 'household income,' down from the 2022 limit of 9.61 percent."

As explained in the ACA Times, this means that "employers extending health plans to their ACA full-time workforce beginning January 1, 2023, must ensure the contribution amount is no more than 9.12% of their household income."

Of course, this is just an introduction to a complex series of provisions. Whether you have questions about yourself or a company you manage, work with qualified tax and legal experts to make sure you are following the ACA's provisions — and getting everything you're entitled to.

©2023