Don't Mess With Taxes

More than a dozen states now provide marketplace options to health care shoppers. And although the federal enrollment mandate and penalty is gone, some states still require their residents to get coverage or pay a price. Plus, federal tax help remains for some seeking medical insurance on their own.

The annual employee benefits enrollment period, usually referred to as open season, is underway or about to begin across the country.

During these weeks, workers choose from an array of employer-provided and usually tax-favored benefits. I'll be writing more on this shortly. You can read more on the annual benefits selection season in my post about growing interest in a workplace-sponsored rainy day fund.

Some folks, however, don't work for a company that can afford to offer many if any benefits. Or they are self-employed.

So they have to fend for themselves when it comes to one of the most popular perks, medical coverage.

In these cases, they typically turn to HealthCare.gov, the health care marketplace that was created as part of the Affordable Care Act (ACA), still popularly known as Obamacare. Here you can search for coverage that meets your and your family's medical needs and your financial situation.

In preparation for this experience, today's multiple Saturday Shout Outs go to a variety of articles and blog posts that can help folks who must get health care coverage on their own rather than through an employer's offerings.

More states join the marketplace model: The federal health care marketplace enrollment or re-enrollment period is a bit later than most private sector open seasons. It starts Nov. 1 and runs through Dec. 15.

But not everyone heads to the federal online healthcare search tool. Instead, they use the marketplaces created by their states.

Currently 13 states and the District of Columbia have their own marketplaces:

State marketplaces are in the works in Maine, New Mexico, Oregon and Pennsylvania.

The table below from To The Point, the Commonwealth Fund's feature on health care policy and practice, details the key differences between the marketplace models.

The Robert Wood Johnson Foundation cites three primary factors that drive states to switch from the HealthCare.gov platform to a full state based marketplace:

1. The prospect of costs savings,
2. An improved consumer experience and
3. Regaining more autonomy over their insurance markets.

And a couple of states have dropped their own health care coverage efforts.

Kentucky abandoned its state-based marketplace in 2016 after the election of its Republican governor who campaigned against the ACA. Hawaii transitioned to the federally facilitated marketplace in 2016 after a number of technological challenges.

Health care marketplace shopping tips: Before you head on over to HealthCare.gov or, if you live on of the locales listed earlier, to the marketplace in your state, you'll need to do some homework.

HealthCare.gov suggests 5 easy ways to prepare for the 2020 Marketplace open enrollment.

And if it's your first time looking for coverage via the marketplace, definitely check out the checklist (in PDF format) of what information and material you'll need to complete your coverage application.

No federal, but possible state penalties: Also note that if you decide to roll the dice and go without coverage, you won't face any federal tax penalty.

The Tax Cuts and Jobs Act (TCJA) eliminated the federal individual mandate effective Jan. 1. This was the charge collected at tax filing time from individuals who didn't have acceptable minimal health care coverage for the full tax year.

Some states, however, have implemented their own non-coverage penalties.

California, the District of Columbia, Massachusetts, New Jersey, Rhode Island and Vermont have written into law statewide individual mandates. The ACA Times has more on just what charges non-covered individuals (and companies) could face in those jurisdictions.

In most cases, the states' individual penalties mirror the federal individual mandate penalty that was in effect for 2018. That could amount to hundreds of dollars depending upon your family size and amount of time you and/or they didn't have medical insurance.

Policy premium coverage tax help still available: And while the TCJA eliminated the penalty for not buying health care coverage, it left in place the federal tax subsidy, known as premium tax credits (PTC), to help buy policies.

As of early 2019, 87 percent of the more than 10.6 million people who got coverage through the exchanges qualified for this type of subsidy.

PTC amounts are based on a sliding scale. Those who have a lower income get a larger credit to help cover the cost of their insurance.

They also are refundable, meaning if the amount is more than your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund.

If you qualify, you can claim your PTC up-front and use it to pay for your marketplace policy. Or you can claim it when you file your return. In either case, you'll have to file Form 8962 when you file your return to claim the credit or reconcile the amount of your advance PTC

Cost sharing help for some: There also are cost-sharing reductions (CSR), also known as cost-sharing subsidies, that can reduce enrollees' out-of-pocket payments. Nearly 5.5 million exchange enrollees had received cost-sharing reductions as of early 2019.

The cost-sharing subsidies are designed to reduce the portion of a claim that an insured individual must pay. Like the premium subsidies, eligibility is based on income.

But premium tax credits apply to all marketplace plans, CSRs are only available on certain plans. Louise Norris has details in her article on ACA cost-sharing subsidies at HealthInsurance.org.

I know that's a lot of homework if you plan to get medical coverage through a marketplace. But with the start of that open season still almost three weeks away, you should have plenty of time to take in all that today's Saturday Shout Out articles have to offer on the subject.

Happy health care shopping and stay healthy!

You also might find these items of interest:

• Medical tax provisions affected in 2019 by inflation 
• Some DNA test costs are tax deductible. Are smartwatches, other health apps next on IRS-OK list? 
• New IRS guidance expands high deductible health plan HSA options for treatment of chronic medical conditions

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