example (continued)If, instead, Damon’s daughter had been eligible for Medicaid, the bronze cost (Line 1) would be the same, but the SLCSP on Line 10 would be zero because the daughter was eligible for coverage outside the individual market, namely government-sponsored Medicaid.For more information on the unaffordability exemption, refer to Form 8965 and its instructions.EXERCISES (continued)Question 7:Randy was covered by Medicaid until February 23rd. He started a new job and his employer-sponsored health coverage started on May 1st. Does an exemption apply? ¨Yes ¨No
Affordable Care Act3-9What is the shared responsibility payment (SRP)?If a taxpayer (or anyone the taxpayer can claim as a dependent) doesn’t have MEC and doesn’t qualify for a coverage exemption, they will need to make an SRP when filing their tax return. The software will compute the SRP based on the entries you make. The payment computation, to put it as simply as possible, is the greater of a percentage of income or a flat dollar amount, but no more than the national average premium for bronze level coverage.The percentage of income amount is the percentage of the excess portion of household income over the federal income tax filing threshold for the primary tax filer (or joint filers) in the family. The percentage is 2.5 percent for 2017. In future years, a cost-of-living adjustment will apply.The “flat dollar amount” is $695 for tax year 2017. A cost-of-living adjustment will apply to the flat dollar amount each year. These figures are halved if the individual without coverage is under age 18 as of the beginning of the month.The maximum flat dollar amount for a family cannot exceed 300 percent of the amount for one adult no matter how many dependents are in the family. For 2017, it’s $2,085 per household or $695 x 3.Compare the flat dollar amount and the income percentage amount and use the greater of the two amounts. The resulting amount is capped at the National Average Bronze Plan Premium. The individual shared responsibility payment is the greater of the flat dollar amount or the percentage of income amount, but never more than the national average premium for the bronze level plan.This ensures that the payment amount is never more than the approximate cost of basic coverage for a year. In the example below, determine the SRP due for 2017. These amounts will be indexed for inflation for years after 2017.exampleSingle individual with $40,000 income:Jim, an unmarried 30-year-old with no dependents, did not have MEC for any month during 2017 and does not qualify for a coverage exemption. For 2017, Jim’s household income was $40,000 and his filing threshold is $10,400. • To determine his monthly payment amount using the income formula, subtract $10,400 (filing thresh-old) from $40,000 (2017 household income). The result is $29,600. Two and a half percent of $29,600 equals $740.