Brief Summary


The Patient Protection and Affordable Care Act, more commonly referred to as the Affordable Care Act was created to ensure that all Americans have access to quality, affordable health care and to create the transformation within the health care system necessary to contain costs. The Congressional Budget Office has determined that the Patient Protection and Affordable Care Act will be fully paid for, ensures that more than 94 percent of Americans will have health insurance, bends the health care cost curve, and will reduce the deficit by $118 billion over the next ten years and even more in the following decade. (This is according to the US Senate Summary of the Act.)

Quality, Affordable Health Care for All Americans

The Affordable Care Act will be a fundamental transformation of health insurance through shared responsibility. Systemic insurance market reform will eliminate certain practices by health insurers and include more provisions to benefit individuals.These reforms include a provision that all Americans must have coverage. Tax credits for individuals, families, and small businesses are available to help ensure that insurance is affordable for everyone.

The Patient Protection and Affordable Care Act highlights include:

  • The elimination of lifetime and unreasonable annual limits on benefits
  • The prohibition of rescissions of health insurance policies
  • Assistance for those who are uninsured because of a pre-existing condition
  • The prohibition of pre-existing condition exclusions for children
  • Required coverage of preventive services and immunizations
  • Extending dependant coverage up to age 26
  • Capping of insurance company non-medical, administrative expenditures

Health Insurance Market Reform

Beginning in 2014, more significant insurance reforms will be implemented. Across individual and small group health insurance markets in all states, new rules will end medical underwriting and pre-existing condition exclusions. Insurers will be prohibited from denying coverage or setting rates based on gender, health status, medical condition, claims experience, genetic information, evidence of domestic violence, or other health-related factors.

Available Coverage

A qualified health plan, to be offered through the new American Health Benefit Exchange, must provide essential health benefits which include cost sharing limits. No out-of-pocket requirements can exceed those in Health Savings Accounts, and deductibles in the small group market cannot exceed $2,000 for an individual and $4,000 for a family. Coverage will be offered at four levels with actuarial values defining how much the insurer pays: Platinum – 90 percent; Gold – 80 percent; Silver – 70 percent; and Bronze – 60 percent.

American Health Benefit Exchanges

By 2014, each state will establish an Exchange to help individuals and small business employers obtain coverage.

Making Coverage Affordable

New, refundable tax credits will be available for Americans with incomes less than 400 percent of the federal poverty line (FPL). The credit is calculated on a sliding scale beginning at two percent of income for those up to 133 percent FPL and phasing out at 9.5 percent of income at 400 percent FPL. If an employer's coverage exceeds 9.5% percent of a worker's family income, or the employer pays less than 60 percent of the premium, the worker may enroll in the Exchange and receive tax credits.

Large Employers - Shared Responsibility

01 Any employer with at least 50 full-time equivalent employees FTEs that does not offer coverage and has at least one full-time employee receiving the premium assistance tax credit or cost sharing subsidy in an Exchange will pay a penalty for not offering coverage.The penalty is $2000 annually times the number of full-time employees minus 30.The penalty is increased each year by the growth in insurance premiums.

02 Any employer with at least 50 full-time equivalent employees FTEs that offers coverage that is deemed unaffordable, whereby the employer pays less than 60% of covered health care expenses, will pay a penalty of $3,000 annually for each full-time employee receiving a premium tax credit, up to a maximum of $2,000 times the number of full-time employees minus 30. The penalty is increased each year by the growth of in insurance premiums.

03 Any employer with at least 50 full-time equivalent employees FTEs where no employee pays more than 9.5% of family income for coverage is considered to offer affordable coverage and no penalty payment is required.

  • Click [HERE] to see a Penalty Flow Chart for Employers who do not offer affordable coverage under the Affordable Care Act.

Small Employers Health Care Reform Tax Credit

New laws provide tax credits to eligible employers who offer health insurance to their employees. Employers that offer health insurance to their employees may qualify to receive the IRS Tax Credit for Small Employer Health Insurance Premiums.To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees FTEs . Those employees must have average wages of less than $50,000 a year.

To determine if you qualify for the Small Business Health Care Reform Tax Credit,

  • Click [HERE] to determine if you are a small or large business employer.
  • If you qualify for the Tax Credit, then Click [HERE] for the IRS Small Employer Tax Credit Worksheet

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That's both a credit and a deduction for employee premium payments.

There is GOOD NEWS for small tax-exempt employers, too. The credit is REFUNDABLE, even if you have no taxable income. You may be eligible to receive this credit as a refund so long as it does not exceed your Income Tax Withholding and Medicare Tax Liability. Finally, if you can benefit from the credit this year but forgot to claim it on your tax return, there's still time to file an amended tax return.

To claim this credit, you must use Form 8941 to calculate the credit.

  • Click [HERE] for Form 8941 - "Instructions".
  • Click [HERE] for Form 8941 - "Credit for Small Employer Health Insurance Premiums".

If you are a tax-exempt organization, include the amount on line 44F of the Form 990-T ( see link below ). You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.

  • Click [HERE] for Form 990-T - "Exempt Organization Business Income Tax Return".

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