The Affordable Care Act (ACA) requires each state to have a competitive marketplace, known as an Affordable Health Insurance Exchange (Exchange), for individuals and small businesses to purchase private health insurance. All Exchanges will launch open enrollment in October 2013 with coverage becoming effective as early as Jan. 1, 2014.
On July 5, 2013, the Department of Health and Human Services (HHS) released a final rule addressing verification of eligibility for Exchange coverage subsidies. In the final rule, HHS announced that Exchanges will not be required to perform comprehensive verifications of income or eligibility for employer-sponsored coverage. Instead, the rules provide that:
• Exchanges can verify income eligibility on a random basis in 2014; and
• State-based Exchanges will not be required to perform random verification of employer-sponsored coverage until 2015.
States have a few options available to them with respect to the establishment of their Exchanges. A state may:
• Create and operate its own state-based Exchange;
• Have HHS operate the federally-facilitated Exchange (FFE) for its residents; or
• Partner with HHS so that the state is involved with the operation of the FFE.
For 2014, 17 states and the District of Columbia have been cond itionally approved to operate their own state-based Exchanges, seven states have been conditionally approved for partnership Exchanges, and 26 states have opted to have HHS run the Exchange in their state. See the chart on Page 3 for information on each state’s Ex-change decision.
Health Insurance Subsidies
Beginning in 2014, federal subsidies will be available to help individuals purchase health insurance through an Exchange. The subsidies are designed to make coverage through an Exchange more affordable by reducing out-of-pocket health care costs. There are two federal health insurance subsidies available: premium tax credits and cost-sharing reductions. Premium tax credits are available for individuals with income of between 100 percent and 400 percent of the federal poverty line (FPL). Reduced cost-sharing is available for individuals with lower incomes (up to 250 percent of FPL).
To be eligible for the subsidies, a taxpayer:
• Must have household income for the year within the limits described above;
• May not be claimed as a tax dependent of another taxpayer; and
• Must file a joint return, if married.