If a person within a household had a Marketplace insurance plan in the previous year, they should receive a Health Insurance Marketplace Statement, otherwise known as Form 1095-A. This prepopulated tax form is sent to consumers by mail no later than mid-February to those who were enrolled in a qualified health plan (QHP). Marketplace consumers enrolled in catastrophic plans, dental-only plans or those who received an exemption and did not enroll in QHP coverage, will not receive Form 1095-A.
What Is the Health Insurance Marketplace?
The Health Insurance Marketplace refers to a platform that offers insurance plans for small businesses, families and individuals. While many states have established their own version of the Marketplace, the federal government is responsible for managing this exchange that is open to residents of other states. The Marketplace was created to provide to those Americans without access to health insurance through employer-sponsored plans, the opportunity to purchase coverage. It also facilitates competition among private insurers.
What Does Form 1095-A Entail?
Once the Form 1095-A is received in the mail, it does not have to be returned to the U.S. government, but rather serves as a personal record of an individuals’ health coverage. The 1095-A Form includes a range of information, such as the effective date of coverage, the amount of premiums paid monthly and possible advance payments of the premium tax credit (APTC) or subsidy.
Why Is Form 1095-A Needed?
The Affordable Care Act (ACA) was signed into law in March 2010. In 2014, the government amended the act and mandated a requirement for all people to be covered by health insurance.; those taxpayers who were not covered by health insurance were ordered to pay a tax penalty. Anyone participating in coverage from the Marketplace may be eligible for subsidized coverage or certain tax credits; that information is provided on Form 1095-A.
Information found on Form 1095-A is needed by consumers to complete Internal Revenue Service (IRS) Form 8962: Premium Tax Credit. Form 8962 must be completed and filed with the consumer’s federal income tax return if they intend to claim the premium tax credit (PTC), or if they want to receive premium assistance through the APTC. Individuals that receive the APTC must file a federal income tax return.
What If Form 1095-A Contains Incorrect Information?
It is possible to receive a 1095-A Form that contains inaccurate information. After receiving the form in the mail, carefully read through the document, including the instructions written on the back. If any information on the form regarding the coverage or household is inaccurate, contact the Marketplace Call Center.
Note that if the monthly enrollment premium is different than what it was previously, it may not necessarily be wrong. If the plan included benefits such as adult dental or vision, in addition to essential health benefits required by law, the monthly enrollment premium may only show the amount of the premium applied to the essential health benefits.
The monthly enrollment premium may also differ if a household member started or ended coverage mid-month. When this occurs, Form 1095-A will only show the premium for the portion of the month for which coverage was provided.
Differences in cost may also occur if a person and their dependent under age 18 were enrolled in a stand-alone dental plan. In this case, the monthly enrollment premium may be higher because it includes a portion of the dental plan premiums for pediatric health benefits.
How Should Form 1095-A Be Filed at Tax Time?
Form 1095-A will be needed by an individual or their tax preparer if they have received health coverage through the Marketplace in the previous year. The IRS recommends waiting until Form 1095-A is received through the mail before filing an income tax return. The information on this document is important and will affect the reporting and claiming of tax credits which can affect the amount of income tax owed or refund due.
Income is used to determine eligibility for a Premium Tax Credit. A person’s income has to fall between 100 and 400 percent of the federal poverty level to qualify. As of 2022, the poverty level for a single person in most of the U.S. is $13,590. Multiply this number by four to get 400 percent of the level. For example, the eligible ranges for the calendar year 2022 include:
- For 1 Persons in Family/Household: $13,590 – $54,360
- For 2 Persons in Family/Household: $18,310 – $73,240
- For 3 Persons in Family/Household: $23,030 – $92,120
- For 4 Persons in Family/Household: $27,750 – $111,000
- For 5 Persons in Family/Household: $32,470 – $129,880
- For 6 Persons in Family/Household: $37,190 – $148,760
- For 7 Persons in Family/Household: $41,910 – $167,640
- For 8 Persons in Family/Household: $46,630 – $186,520
For households that have more than eight people, add $4,720 for each additional person. The cost of living is higher in Hawaii and Alaska, resulting in higher poverty levels.
Those taxpayers eligible for the Premium Tax Credit typically may acquire it through one of two ways. How the credit will be received is generally made when purchasing coverage in the Marketplace.
One way is for the credit to be used to reduce taxes when filing their tax return. Alternatively, the credit can be used to reduce insurance premiums in advance at the time of paying the insurance premiums. This second option can be more complex as it requires the government to provide the credit in advance by sending funds to the insurer to reduce the cost of premiums.
Speak with a Business Benefits Consultant at BBG
This Health Insurance Marketplace Statement is an important document that should be safely stored and reported when filing taxes. Receiving the 1095-A without an understanding of what it means may create confusion. For more information about 1095-A, request a consultation with a benefits expert at the Business Benefits Group.