Health Insurance and Taxes: Avoid a Five-Figure Penalty with Form 1095
Updated: Mar 3
What is Form 1095?
If you are insured by an Employer, Medical Assistance, Medicare, or individually, you’ve probably thrown this form in with your paperwork and given it to the accountant come tax time.
This form has two KEY purposes:
To prove that you have qualified insurance somewhere.
To tell the IRS if you had any help paying for that insurance with tax credits.
The first purpose used to be a lot more important before spring of 2019 when the Affordable Care Act coverage mandate could cause you to be penalized if you went without insurance. For example, in 2017¹ you could have paid a fine of $695 per adult plus a smaller amount for minors, or 2.5% of your income, whichever was higher.
Since 2019 this mandate was repealed. These days, the proof is still “required” by individuals, but nothing will happen if you miss this form when it comes to proving you have insurance. It’s more important for your employer to send the form out to you and to send a copy to the IRS.
That said, the second purpose of reporting tax credits is crucial, especially this year.
You may have received tax credits if you had enrolled in health insurance directly, or with a broker using Pennie, Get Covered NJ, BeWellNM, Healthcare.gov, or any other state-based marketplaces. Many of these state-level marketplaces are new for 2021, and if you use a broker you may not realize they use these systems.
One way to tell if you got help via a credit is if they used the term “tax credit”, “subsidy”, or “discount” when it came to talking about your health insurance premium.
What these credits do, in lay terms, is bring the average plan in your area down to a premium that is affordable for you. The average is used to figure out how much help you received, and then you use that credit to lower the cost of all of the plans offered through your marketplace. According to the Kaiser Family Foundation², a national nonprofit, the average monthly credit each person receives is $491 per person per month across the United States.
So, for a family of four, that average is $23,568! ($491 x 4 people x 12 months)
If you don’t show proof of your income AND any credits you were given in 2021 come tax time, the IRS could hold you responsible to repay that amount back.
American Rescue Plan’s Impact
Adding to the statements above, the American Rescue Plan was passed in March 2021, resulting in three additional reasons you may have credits.
People who received ANY unemployment in 2021 would have received the maximum amount of health insurance savings, and the lowest premium regardless of what their income turned out to be at the end of the year.
People whose income used to be too high for help, for 2021 and 2022 they are frequently being offered help.
Across the board, ARP changed the calculation to determine how much help consumers received. Many people starting in June paid little to no premium for the remainder of the year. This must be reported.
How To Get Your 1095?
Now that we have talked about why a 1095 is important, let’s address how you get one if you are on your own.
MAIL: Most states have dropped a physical copy in the mail. Each week in January they sent batches of letters until all consumers received their copy.
ONLINE: If you requested all correspondence be sent to you via email, or you didn’t get yours, go online to the specific marketplace designated for your state and log in. If you aren’t sure what your marketplace is, you can always start at the federal site Healthcare.gov. If you put in your zip code it will tell you, and link you over to the specific system in your state. See below for an example.
BROKER: As always, you can always reach out to your broker. Once you have a broker listed on your record, we have the ability to download and send your 1095 right to you, or your accountant directly.
Of course, if you don’t have a broker, we’d recommend you contact one. Did you know they are free³ to you and must be both licensed in your state and certified with the marketplaces? For us to be able to help, you can either complete an intake here, call us at 7174001244 so we can get added to your account, or log in to your account and add us.
If you are in Pennsylvania, log in to Pennie.com and then open a new tab and go here: https://bit.ly/PenniePAHA.
https://agency.pennie.com/wp-content/uploads/Broker-designation-2.pdf is the guide you use to add any broker.
What to Do with Your 1095?
Once you have your 1095, forward that document to your tax preparer. If you are more of a DIYer then we’d recommend using the IRS resources at https://www.irs.gov/affordable-care-act/individuals-and-families
To summarize, here are several reasons, regardless of what you've done in the past, that this year may be the one that this form is crucial for you. Let your accountant know if you had insurance outside of work, and reach out to a broker if you need help getting your hands on the paperwork.
ABOUT PA HEALTH ADVOCATES
The team members at PAHA have been in the insurance market for the past 11 years. Each having their own issues and experiences on the treatment and billing side of healthcare, they have worked one on one to help consumers avoid common and not so common pitfalls. They are also interwoven with government and public workgroups at NAHU, HAFA, CPBGH, CMS, PID, and Pennie, to keep a pulse on the market, and speak up when policy changes need to be made. Their Principal, Joshua Brooker, is focused on the Individual, Small Group, Medicare and Medicaid markets across several states