On January 1, 2014, the Affordable Care Act's requirement that all individuals secure healthcare coverage will take effect. The November issue of Church Finance Today discussed tax credits available to churches that provide healthcare insurance coverage to their employees. (See "Health Insurance Credit May Benefit Many Churches," Church Finance Today, November 2013.) But what if your church doesn't provide healthcare coverage? In this article, I'll cover the essentials for church employees in search of their own medical insurance.
1. What are the Affordable Care Act's requirements regarding individual coverage?
Beginning in 2014, all individuals and families who can afford to purchase health insurance must do so. Those who choose not to purchase health insurance are subject to a government-imposed fee and in addition, are required to pay 100 percent of their healthcare costs. The government-imposed fee is known as the "individual shared responsibility payment."
In 2014, the fee for not purchasing health insurance is 1 percent of an individual's yearly income or $95 per person for the entire year, whichever amount is greater. Additionally, the 2014 fee for uninsured children is $47.50 per child, with a cap at $285. These fees are not stagnant; they increase each year. Moreover, they are not a substitute for paying healthcare expenses. Uninsured individuals must pay both 100 percent of their healthcare costs and the government-imposed fee.
2. What if an individual or family cannot afford coverage?
Individuals and families who cannot afford coverage can apply for an exemption from the fee that results from failure to secure coverage. This type of exemption is called a "hardship exemption," and individuals qualify if they have experienced or are experiencing one of the following circumstances:
Eviction in the past six months or imminent eviction or foreclosure
Receipt of a shut-off notice from a utility company
Death of a close family member
Fire, flood, or other disaster that caused substantial damage to property
Filing for bankruptcy in the last six months
Inability to pay medical expenses in the last 24 months
Increases in necessary expenses due to caring for an ill, disabled, or aging family member
Ineligibility for Medicaid due to residence in a state that did not expand eligibility for Medicaid under the Affordable Care Act
Individuals also qualify for an exemption from the fee if they are uninsured for less than 3 months of the year; if the lowest-priced coverage available to them is greater than 8 percent of their income; if they are a member of a recognized health care sharing ministry; or if they are a member of a religious sect with objections to insurance.
3. How much coverage must individuals and families secure to meet the Act's requirements?
According to the Affordable Care Act, individuals and families must secure "minimum essential coverage." The following types of coverage meet this threshold:
Plans purchased through the Healthcare Marketplace
Individual insurance plans previously purchased
Employer Plans (including COBRA and retiree plans)
The Children's Health Insurance Program (CHIP)
Veterans healthcare programs
Peace Corps Volunteer Plans
On their own, the following types of coverage do not qualify as "minimum essential coverage":
vision care or dental care coverage
coverage only for a specific disease or condition
plans that simply offer discounts on medical services
Individuals who have only these types of healthcare coverage are at risk of paying a fee for being uninsured.
4. How can individuals secure healthcare coverage for themselves and their families?
Individuals who are not covered under an employer-funded health insurance plan have three primary options for securing their own coverage: (1) purchase coverage through the Health Insurance Marketplace, (2) purchase coverage directly from an insurance company, or (3) participate in a healthcare sharing ministry.
Purchasing Coverage through the Health Insurance Marketplace
The Health Insurance Marketplace, sometimes referred to as the "exchange," is a government-sponsored means of learning what health insurance options are available and comparing them. Individuals looking for coverage can go to healthcare.gov/marketplace/individual and by setting up an account, can conduct a side-by-side comparison of the insurance plans available to them in their state. Plans are presented in categories (e.g., bronze, silver, gold, platinum, and catastrophic) so that individuals can more easily differentiate between them.
The advantages of securing insurance via the Health Insurance Marketplace are threefold: First, all of the plans offered through the Marketplace are "qualified health plans." This means that, among other things, they are guaranteed to provide certain essential health benefits and follow specific guidelines regarding deductibles and copayments. Second, purchasing a plan through the Marketplace allows for adjusted premiums and out-of-pocket costs based on household income and size. For example, a family of four that registers a household between $23,550 and $94,200 is eligible for lower premiums. The premium savings are distributed through a tax credit that can be applied directly to the premium each month. Finally, purchasing a plan through the Marketplace ensures individuals that they will not be turned away because they have a specific medical condition. All Marketplace plans are required to cover the treatment of pre-existing conditions.
Purchasing Coverage Directly from an Insurance Company
Individuals are not required to purchase health coverage through the Health Insurance Marketplace. As in the past, coverage can be purchased directly from an insurance company.
The disadvantage to shopping for coverage outside of the Marketplace is that insurance companies are not required to adjust premiums and out-of-pocket costs based on income, nor are they required to cover pre-existing conditions. However, if an individual's income is high enough that he/she would not qualify for an adjustment through the Marketplace, and pre-existing conditions are not a concern, shopping elsewhere might provide additional health coverage options.
Participating in a Healthcare Sharing Ministry
Healthcare sharing ministries present an alternative to traditional health insurance. Participants in these ministries pay premiums (at a level of their choice), but unlike traditional insurance, the sums participants pay are matched with the medical bills of other eligible participants. Moreover, paying premiums does not guarantee coverage of qualifying medical expenses as it does with traditional insurance. To participate in these ministries, individuals usually must agree to certain lifestyle choices, such as refraining from tobacco use and drinking alcohol only moderately. Proponents of the sharing ministry model assert that it mirrors the example set by the New Testament church.
Key Point. The Affordable Care Act specifies that individuals who participate in a healthcare sharing ministry are exempt from the requirement to purchase health insurance. See 26 U.S.C. § 5000A (d)(2)(B).
5. Where can individuals find answers to questions about the coverage requirements of the Act?
For answers to additional questions, individuals should consult healthcare.gov. This website provides a wealth of information in an understandable format. Website visitors can initiate a "live chat" with a representative or call 1-800-318-2596 and presumably receive answers to specific, individualized questions.
Sarah E. Merkle, J.D., is a litigation associate with Bradley Arant Boult Cummings, LLC, in Birmingham, Alabama.
Key Dates for Purchasing Coverage through the Health Insurance Marketplace
October 1, 2013
Health Insurance Marketplace opened for individuals and families to purchase plans.
December 15, 2013
Deadline to enroll in a plan offered through the Marketplace in order to receive coverage beginning on January 1, 2014.
March 31, 2014
Open enrollment through the Marketplace ends. After this date, individuals cannot enroll in a plan through the Marketplace unless they have a qualifying life event (e.g., relocation to another state, marriage, divorce, or birth of a child). Open enrollment will begin again in October 2014.
January 1, 2014
Beginning of coverage under plans purchased through the Marketplace.
Read More on the Affordable Care Act
Attorney Frank Sommerville explains the Act's effects on churches in 2013 and 2014, including how to determine whether your church must provide coverage.
A thorough review of the Affordable Care Act by Richard Hammar.
The written notice that churches must provide to pastors and staff about health insurance.
An in-depth explanation of a special tax credit the Act provides to churches that offer health care to employees.
Q&A: Can ministers opt out of the Act?