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7 Marketplace Coverage and Taxes Getting Ready for Tax Season January 2016

8 Health Insurance Coverage Affects Consumer Taxes Health coverage impacts a consumer s taxes CMS is coordinating with the Internal Revenue Service (IRS), tax preparers, tax software developers, State-based Marketplaces, and other stakeholders to help consumers understand the connection between taxes and healthcare, and what they need to do when filing taxes for 2015 This presentation focuses on the Federally-facilitated Health Insurance Marketplace and State-Partnership Marketplaces State-based Marketplaces (SBMs) may have different rules and processes Contact the SBM for information January 2016 Marketplace Coverage and Taxes 2

9 Consumers Must File Their Taxes When Claiming a Premium Tax Credit (PTC) Consumers need help making the connection between Premium Tax Credits and Filing Their Taxes Many consumers are unaware that: 1. They must reconcile their advance payments of the premium tax credit or claim the premium tax credit for the first time, 2. They may have to pay a fee if they didn t maintain minimum essential coverage, or 3. They may qualify for an exemption from the fee January 2016 Marketplace Coverage and Taxes 3

10 Overview Premium tax credit (PTC) and ways to use them Reconciliation Shared responsibility payment (fees) Exemptions Form 1095-A, B and C Information for Assisters Resources January 2016 Marketplace Coverage and Taxes 10

11 Consumer Audiences Consumers who had health coverage in 2015 Receive their Form 1095-A or other Forms 1095 If that coverage was a health plan through the Marketplace If they had non-marketplace coverage (such as employer sponsored insurance, Medicare, or Medicaid) File their tax return and reconcile tax credits Consumers who were uninsured for part or all of 2015 Apply for an exemption If they don t have an exemption, pay the shared responsibility payment (fee) If they have an approved exemption, they don t have to pay the fee January 2015 Marketplace Coverage and Taxes 5

12 Non-Marketplace Coverage Most people just need to check a box on their tax form If the consumer had non-marketplace minimum essential health coverage for every month of 2015 for themselves, their spouse (if filing jointly), and anyone they could or did claim as a dependent, they ll just check a box on their tax return January 2016 Marketplace Coverage and Taxes 6

13 TaxWise ACA Worksheet

14 TaxWise ACA Worksheet 14

15 Form 1095-A For Marketplace Consumers If the consumer had coverage through a Marketplace qualified health plan in 2015 They ll get a new Form 1095-A in the mail it will help them fill out Form 8962 to file their federal income taxes with the Internal Revenue Service (IRS) (only the Form 8962 is submitted) Wait for the form to file (postmarked by January 31, 2016) January 2016 Marketplace Coverage and Taxes 15

16 What s Advance Payment of the Premium Tax Credit (APTC) Reconciliation? The total APTC received during the year will be reconciled with the amount of premium tax credit (PTC) that the consumer may qualify for when they file their annual tax return If the consumer s APTC Was less than the PTC amount on their Form 8962, their refund will increase by the difference or the amount of taxes they owe will be lowered Was greater than the PTC amount on their Form 8962, the difference will increase the amount they owe and their refund will either be smaller, or they may have a balance due January 2016 Marketplace Coverage and Taxes 26

17 Form 1095-A May Need Corrections Consumers should log onto HealthCare.gov or contact their issuer to confirm their information is correct Form data issues may arise if a consumer has Failed to report a change in circumstance to the Marketplace Retroactive application of eligibility appeals decision Partial months enrollment Grace period and subsequent termination Dropped coverage before 12/31/2015 Changed coverage to a different qualified health plan (QHP) Added or dropped members in their plan Failed to update demographic or enrollment information January 2016 Marketplace Coverage and Taxes 11

18 How to Report Form 1095-A Data Issues Incorrect demographic information (for example, name, date of birth, or Social Security Number), can be updated directly by the consumer when they file their federal income tax return without the need to generate a corrected Form 1095-A Incorrect enrollment-related information (for example, policy issuer s name, policy start or end date), should be reported by consumers to the Marketplace Call Center for research and resolution The Marketplace will Research the consumer s inquiry Update incorrect information when appropriate Mail and upload a corrected Form 1095-A to a consumer s online account Send Internal Revenue Service (IRS) the corrected Form 1095-A January 2016 Marketplace Coverage and Taxes 118

19 Form 1095-B and 1095-C Consumers may also get Form 1095-B or Form 1095-C If they or members of their household had coverage in 2015 through other programs or plans outside of the Marketplace Form 1095-B (Health Coverage), or Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) It s important to follow the instructions on these forms, to ensure that they fill out their federal income tax return correctly January 2016 Marketplace Coverage and Taxes 8

20 What is the Premium Tax Credit (PTC)? The PTC helps eligible consumers afford health coverage purchased through the Marketplace Eligibility is based on household income (100% - 400% FPL) and family size Consumers can choose how much APTC to apply to their premiums each month, up to a maximum amount APTC must be reconciled at the end of the year Consumers who receive APTC must file federal taxes Jointly if married, though there are some exceptions PTC can be claimed even if consumers didn t apply for financial assistance when they submitted their Marketplace application January 2016 Marketplace Coverage and Taxes 21

21 Ways to Use a Premium Tax Credit Choose to Get It Now: Advance Payments of the Premium Tax Credit (APTC) All or some of the APTC is paid directly to the consumer s plan on a monthly basis The consumer pays the difference between the monthly premium and APTC The consumer reconciles the APTC when you file a tax return for the coverage year Choose to Get It Later Don t request any advance payments The consumer pays the entire monthly plan premium The consumer claims the full amount on the tax return filed for the coverage year January 2016 Marketplace Coverage and Taxes 22

22 Report All Changes Consumers should report all changes in the information they provided on their application The changes may affect the premium tax credit and other coverage options you may qualify for To avoid owing money, if they got more PTC then they were eligible for, after reconciliation on their tax return, or They could get money back or credited against any tax they may owe if they didn t get all the PTC for which you were eligible. Certain changes may qualify you for a Special Enrollment Period, allowing you to change plans outside Open Enrollment. In most cases, you have 60 days from the event to change or update your coverage. January 2016 Marketplace Coverage and Taxes 23

23 Which Changes to Report Changes to income Changes in health coverage Someone in your household losing coverage, like job-based coverage or Medicaid Changes to your household or individual members Correction to name, date of birth, or Social Security number Changes in status

24 How to report changes to the Marketplace You can report changes to the Health Insurance Marketplace 3 ways: Online By phone In-person NOT by mail

25 How to Read Form 1095-A 25 This is the full premium: the actual premium paid plus the APTC. It excludes the value of certain extra benefits, such as adult dental. If the premium is -0- but there is an APTC, the person didn t pay their premium. They can pay it by April 18 and claim PTC for the month, or with no premium, they must repay the APTC received for that month. (Enter as written on Form 1095-A.) If there are multiple rows with -0- and an APTC value, this is an error. Seek a corrected Form 1095-A. This is the benchmark plan that helps establish the PTC amount. It s based on family size, ages, and location. You may need to look up the SLCSP if: (1) It is incorrect, perhaps because a change in family size was not reported. (2) It is missing. This happens when someone paid the full premium. Other Marketplaces routinely leave this space blank. See healthcare.gov/tax-tool or your state s tax tool. Advance payment of PTC If there is a premium amount in Column A for a month and no SLCSP or APTC, the taxpayer paid the full premium cost but may still be entitled to PTC! If they appear eligible, enter the SLCSP to calculate the correct PTC.

26 Troubleshooting: Ineligible for PTC 26 A person who is MFS or has income above 400% FPL ($46,680 for a family of one) is not eligible for PTC MFS repayment is capped; income over 400% FPL is not capped Solution: Only enter the APTC in Column E (Column C of Form 1095-A)! Do NOT enter the premium or SLCSP values from Form 1095-A.

27 Troubleshooting: Large repayment 27 Is Form 1095-A correct? Did you enter it correctly? Did you consider income adjustments to reduce household income? Consider the IRA deduction or tuition and fees deduction. Did you consider married filing separately? The taxpayer will technically be ineligible for PTC but the repayment cap may be lower when filing separately. Important! If the taxpayer is still enrolled in Marketplace coverage, they should adjust their 2016 APTC now.

28 Individual Shared Responsibility Payment (Fee) If consumers don t maintain minimum essential coverage (MEC) or obtain an exemption, they may need to pay a fee with their federal income tax return The fee is based on a consumer s household income, and how many months they didn t have health insurance Generally, the higher their household income and the more months they were without health insurance, the higher the fee January 2016 Marketplace Coverage and Taxes 32

29 Fee Amount if the Consumer Didn t Have Any Health Insurance If a consumer didn t have health insurance for any month of 2015, or qualify for an exemption, they ll pay the higher of 2% of their annual household income, or Only the amount of income above the tax filing threshold for an individual is used to calculate the penalty The maximum penalty is the national average premium for a Bronze plan $325 per person for the year ($ per child under 18) The maximum penalty per family using this method is $975 The fee increases every year For non-coverage in 2016, consumers will pay the higher of $695 per person or 2.5% of income over the tax filing threshold After that, it will be adjusted for inflation January 2016 Marketplace Coverage and Taxes 32

30 Check F1040, L61 for EVERY RETURN 30 The value in this line is the shared responsibility payment. Does it make sense? If not, check the ACA worksheet! Last year, at least 300,000 taxpayers paid the SRP instead of claiming the exemption for income below filing threshold. Others overpaid due to other errors. Be careful!

31 Exemption Overview 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 Consumers who qualify for an exemption don t have to pay the fee Consumers claim some health coverage exemptions on their federal tax return, and others with a paper application through the Marketplace Consumers don t have to pay the fee for any month they re covered by a plan that qualifies as minimum essential coverage If they re uncovered only 1 or 2 months, they don t have to pay the fee for any month Consumers should research the exemption type to determine where to claim it If the exemption can be claimed on a federal tax return there s no need to apply for an exemption through the Marketplace December 2015 Health Coverage Exemptions 31

32 Who is Eligible for an Exemption? Can t afford coverage (greater than 8.05% of household ) Experiences a hardship (including those who don t qualify for Medicaid solely based on state s decision not to expand Medicaid) Not lawfully present in the U.S. Incarcerated during coverage year Exemption Categories Experiences a short coverage gap (1 or 2 months of the year) Member of: Federally recognized tribe Health care sharing ministry Recognized religious sect with religious objections to insurance Household income below the tax filing threshold Eligible for care through an Indian health care provider December 2015 Health Coverage Exemptions 32

33 How to file an Exemption Two ways to get an exemption 1. IRS exemptions that consumers can get from the IRS when they file their tax return 2. Marketplace exemptions that consumers need to request by completing a paper application and mailing it to the Marketplace Consumers use IRS Form 8965 to report an exemption granted by the Marketplace or to claim an exemption on their federal tax return Complete Part I if they or another member of their tax household was granted an exemption from the Marketplace Use Part II of Form 8965 to claim an exemption if their income is below the filing threshold but they choose to file a tax return Use Part III to claim other exemptions on their federal tax return Use a separate line for each individual and exemption type claimed on the federal tax return Visit healthcare.gov/health-coverage-exemptions/ for a complete list of exemptions and applications December 2015 Health Coverage Exemptions 33

34 Exemptions Available Through the Marketplace Versus on the Federal Tax Return Exemptions Granted by Marketplace Claimed on tax return Code for Exemption Members of certain religious sects You are a member of a recognized religious sect. X ECN General hardship You experienced a hardship that prevented you from obtaining coverage under a qualified health plan X ECN Coverage considered unaffordable based on projected income You did not have access to coverage that is considered affordable based on your projected household income Determined ineligible for Medicaid in a state that did not expand Medicaid coverage You were determined ineligible for Medicaid solely because the state in which you resided did not participate in Medicaid expansion under the Affordable Care Act Unable to renew existing coverage You were notified that your health insurance policy was not renewable and you considered the other plans available to be unaffordable. Certain Medicaid programs that are not minimum essential coverage You were (1) enrolled in Medicaid coverage provided to a pregnant woman that is not recognized as minimum essential coverage; (2) enrolled in Medicaid coverage provided to a medically needy individual (also known as Spend-down Medicaid or Share-of-Cost Medicaid) that is not recognized as minimum essential coverage; or (3) enrolled in Medicaid, and received minimum essential coverage for one or more months of the year by meeting a spend-down, but not in other months because the spend-down had not been met December 2015 Health Coverage Exemptions 34 X X X X ECN ECN ECN ECN

35 Exemptions Available Through the Marketplace Versus on the Federal Tax Return Continued Exemptions Income below the filing threshold Your gross income or your household income was less than your applicable minimum threshold for filing a tax return Granted by Marketplace Claimed on tax return X Code for Exemption Coverage considered unaffordable The minimum amount you would have paid for premiums is more than 8.05% of your household income X A Short coverage gap You went without coverage for less than 3 consecutive months during the year X B N/A U.S. citizens living abroad and certain noncitizens (such as those not lawfully present) Aggregate self-only coverage considered unaffordable Two or more family members' aggregate cost of self only employer sponsored coverage was more than 8.05% of household income, as was the cost of any available employer sponsored coverage for the entire family Resident of a state that did not expand Medicaid Your household income was below 138% of the federal poverty line for your family size and at any time in 2015 you resided in a state that didn't participate in the Medicaid expansion under the Affordable Care Act Member of tax household born, adopted, or died During 2015 a child was added to your tax household by birth or adoption, or a member of your tax household died during the year, and you can't check the full year coverage checkbox on your tax return X X X X C G G H December 2015 Health Coverage Exemptions 35

36 Exemptions Available Through the Marketplace Versus on the Federal Tax Return Continued Exemptions Granted by Marketplace Claimed on tax return Code for Exemption Members of a health care sharing ministry You were a member of a health care sharing ministry X X D Incarceration You were in a jail, prison, or similar penal institution or correctional facility after the disposition of charges. X X F Members of Indian tribes You were either a member of a Federallyrecognized Indian tribe, including an Alaska Native Claims Settlement Act (ANCSA) Corporation Shareholder (regional or village), or you were otherwise eligible for services through an Indian health care provider or the Indian Health Service X X E December 2015 Health Coverage Exemptions 36

37 Process for Applying for Exemptions through the Marketplace Complete the appropriate application and submit by mail to: Health Insurance Marketplace Exemption Processing 465 Industrial Boulevard London, KY The Marketplace will send an exemption eligibility determination notice after the application is processed Or request additional information if necessary Approved notice will include a unique Exemption Certificate Number (ECN) Consumers use the ECN when they file their federal taxes for the year they don t have coverage Complete IRS Form 8965 Health Coverage Exemptions Each member of a household who qualifies for an exemption will get their own ECN December 2015 Health Coverage Exemptions 37

38 Process for Requesting a Hardship Exemption Read the hardship application and instructions Be sure to include on the application everybody who s on the consumer s federal income tax return, even if they don t need this exemption The application allows consumers to claim other kinds of hardships for themselves, or others on their federal tax return Complete, sign, and mail the application to the address shown on the form December 2015 Health Coverage Exemptions 38

39 Time for Processing Exemption Application Time of processing will vary upon The complexity of the exemption requested Whether the application is missing any information Whether additional supporting documentation is required Should get a written response from the Marketplace within 2 to 4 weeks If the exemption is granted, the notice will include an Exemption Certificate Number (ECN) for each household member Use the ECNs to claim the exemption on 2015 tax returns Keep the written response and ECNs in a safe place so it s easy to find them when it s time to file 2015 federal income taxes December 2015 Health Coverage Exemptions 39

40 Exemption Approval Notice If the Marketplace approves a consumer s exemption application, they should keep the approval notice they get in the mail with other important tax documents, like their W-2 It includes a unique Exemption Certificate Number (ECN) that they ll notate on their federal income tax return If they mailed an exemption application to the Marketplace and are still waiting for a decision when they file their tax return, they should follow the instructions with their tax return to enter Pending in the appropriate places If they apply for the exemption directly from the Internal Revenue Service (IRS) using Form 8965, they won t need an ECN January 2016 Marketplace Coverage and Taxes 35

41 Catastrophic Coverage Individuals who qualify for a hardship exemption can purchase catastrophic coverage even if they are over age 30 To purchase a catastrophic plan: 1. Download, complete, and submit an application for an affordability or a hardship exemption 2. After consumer receives exemption eligibility notice, go to HealthCare.gov to find catastrophic plan information: HealthCare.gov/choose-a-plan/planscategories/#catastrophic 3. Contact health plan issuer selling desired plan to enroll December 2015 Health Coverage Exemptions 41

42 Exemptions Resources Consumers can find exemptions that may apply to them at HealthCare.gov/exemptions-tool/#/ Additional information about exemptions is also available from the Internal Revenue Service (IRS) at irs.gov/affordable-care-act/individuals-and- Families/ACA-Individual-Shared-Responsibility- Provision-Exemptions January 2016 Marketplace Coverage and Taxes 36

43 Exemptions: Where do I start? 43

44 Code G: Medicaid Coverage Gap 44 Individuals who resided at any time during 2015 in a state that did not expand Medicaid, and Had household income below 138% FPL Adjusted Gross Income (AGI) Form 1040, Line 37 Non-Taxable Social Security Benefits Form 1040, Line 20a minus 20b Tax-Exempt Interest Excluded Foreign Income Form 1040, Line 8b Form 2555, Lines 45, 50 Family Size 138% FPL 1 $16,105 2 $21,707 3 $27,310 4 $32,913 Applies to people who lived at any time in 2015 in one of the following states: Alabama Alaska Florida Georgia Idaho Indiana Kansas Louisiana Maine Mississippi Missouri Montana Nebraska North Carolina Oklahoma South Carolina South Dakota Tennessee Texas Utah Virginia Wisconsin Wyoming

45 Code A: Insurance was Unaffordable 45 A person is eligible for this exemption if they were offered insurance that costs more than 8.05% of household income. But which plan cost is measured? 1. Was the person offered employer-sponsored coverage as an employee? Measure its affordability and then STOP. 2. Was the person offered employer-sponsored coverage as a family member of an employee? Measure its affordability and then STOP. 3. If no employer offer, was the lowest-cost bronze plan in the Marketplace affordable? In general But run the calculation to know for sure. o If a person appears to have been eligible for Medicaid but did not enroll, they are likely eligible for the exemption. o If a person appears to have been eligible for PTC but did not enroll, they are likely not eligible for the exemption.

46 Code A: Insurance was Unaffordable 46 More Resources Webinar: Examples of the affordability exemption calculation for employer-sponsored coverage and Marketplace coverage (using the previous version of the Marketplace Tax Tool) Example set: Examples-for-Volunteer-Tax-Preparers.pdf Written examples updated with the new version of the Marketplace Tax Tool.

47 Exemptions E-File Creation Error 47 Check Form 8965 An exemption claimed in Part III may be incomplete There may be a mismatch elsewhere on the form.

48 Tax Tool The tax tool helps certain consumers claim the affordability exemption and calculate their premium tax credit (PTC) The tax tool provides A step in filing taxes for certain consumers to find essential information that might not appear on Form 1095-A A report with monthly break down of the second lowest cost Silver plan (SLCSP) or lowest cost Bronze plan (LCBP) using 2014 and/or 2015 plan data The tax tool doesn t Provide advance premium tax credit (APTC), PTC, or eligibility Require an account or login (i.e., anonymous) January 2016 Marketplace Coverage and Taxes 40

49 Tax Tool Information Available Information Second Lowest Cost Silver Plan (SLCSP) Lowest Cost Bronze Plan (LCBP) Use If a consumer didn t take/qualify for APTC and want to see if they can qualify for PTC To see if a consumer can qualify for an exemption To view the tax tool visit HealthCare.gov/tax-tool/, also available in Spanish at CuidadoDeSalud.gov/es/tax-tool For more information about tax filing and the Affordable Care Act visit irs.gov/affordable-care-act January 2016 Marketplace Coverage and Taxes 41

50 Tax Resources For more information about how your Marketplace coverage will affect your taxes Visit HealthCare.gov/taxes/ or Call the Marketplace Call Center at TTY users should call If you have questions about your taxes, need Form 8962 or 8965, or want to learn more about the fee for not having health coverage, visit IRS.gov. A toll-free line is also available for routine customer service at (800) Consumers who call this toll-free line may receive live or automated assistance (recorded answers) January 2016 Marketplace Coverage and Taxes 42

51 Fact Sheets and Tax Instructions Resource Link Form 1095-A Instructions: Form 8962 Instructions: Affordable Care Act (ACA) Tax Provisions Tax Facts about the Affordable Care Act for Individuals and Families Individual Shared Responsibility Provision Exemptions: Claiming or Reporting irs.gov/pub/irs-pdf/f1095a.pdf irs.gov/pub/irs-pdf/i1095a.pdf irs.gov/pub/irs-prior/f pdf irs.gov/pub/irs-pdf/i8962.pdf irs.gov/affordable-care-act irs.gov/uac/newsroom/tax-facts-about-the-affordable- Care-Act-for-Individuals-and-Families irs.gov/affordable-care-act/individuals-and- Families/ACA-Individual-Shared-Responsibility-Provision- Exemptions January 2016 Marketplace Coverage and Taxes 44

52 Publications and Tax Tool Resource Find health coverage exemptions that apply to you IRS Publication 974 which covers important topics that are not covered in the Form 8962 Instructions and that taxpayers may need to complete Form Link HealthCare.gov/exemptions-tool/#/ irs.gov/pub/irs-pdf/p974.pdf January 2016 Marketplace Coverage and Taxes 45

53 When You Can Enroll in Coverage During the Open Enrollment Period (OEP) The OEP for coverage in 2015 ended February 15 For coverage in 2016, the OEP will be November 1, January 31, 2016 During a Special Enrollment Period (SEP), if eligible Once per month if member of federally recognized Indian tribe or Alaska native shareholder Anytime you re eligible for Medicaid or the Children s Health Insurance Program January 2016 Understanding the Health Insurance Marketplaces 53

54 Special Enrollment Periods (SEPs) You can enroll if you re eligible for an SEP because you have A qualifying life event Most SEPs last 60 days from the date of the life event 30 days in the Small Business Health Options Program (SHOP) Marketplaces January 2016 Understanding the Health Insurance Marketplaces 54

55 Online at HealthCare.gov/screener Use the screening tool to see if you qualify for a Special Enrollment Period Maricopa County January 2016 Understanding the Health Insurance Marketplaces 55

56 Medicaid Eligibility Eligibility tied to groups specified under the federal Medicaid law Pregnant women Children People with disabilities Seniors Parents and caretaker relatives States must cover certain groups, such as children and pregnant women, and have the option to cover other groups, such as childless adults Financial and non-financial requirements January 2016 Understanding the Health Insurance Marketplaces 56

57 Eligibility Medicaid Expansion Affordable Care Act s Eligibility Groups 1. Adult group with income below 133% of FPL 2. Former foster care group Under 26 and enrolled in Medicaid while in foster care at 18 or aged out of foster care (no income test) 3. Optional eligibility group for individuals with income above 133% of FPL Under 65 with income above 133% of FPL 12-month eligibility period for most adults, parents, and children January 2016 Understanding the Health Insurance Marketplaces 57

58 Medicaid Expansion in 2015: 32 States including the District of Columbia January 2016 Understanding the Health Insurance Marketplaces 58

59 From Coverage to Care (C2C) Visit Print copies are available for free. 59

60 From Coverage to Care Roadmap Online at marketplace.cms.gov/c2c 60

61 C2C Information Contact C2C Order Resources 61

62 Contact Information Tara Straw ACA materials for VITA: home/for-tax-preparers/ 62

63 Questions & Answers

64 Complete the Survey