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Obamacare: What Happens if You Don't Have Health Insurance?

For the past several years, Obamacare - or the Affordable Care Act – has been in the news quite a bit.
Wednesday, 24 September 2014

hsa investmentFor the past several years, Obamacare - or the Affordable Care Act – has been in the news quite a bit. One would think that by now the average American would know the ins and outs of the law, including the penalties assessed for individuals who choose not to buy health insurance. Unfortunately that is not the case, and one reason may be the incessant partisan "spin" about Obamacare by lawmakers and the news media.

The cost of being uninsured

It used to be that being uninsured meant you were putting yourself and your family at risk, especially if you couldn't afford to pay for preventive care or prescription drugs; but now the uninsured have another burden in that they might be charged a fee for noncompliance with the law. While the fee itself may go by many different names (individual responsibility payment, penalty, individual mandate), it is simply a way to offset the cost of healthcare subsidies for low-income individuals.

When can I enroll in Obamacare?

Like most group healthcare plans, the Open Enrollment periods are limited to specific timeframes. The Marketplace enrollment periods take place in March and November, with the next one beginning on November 15, 2014. However, if you qualify for a special enrollment period or need to apply for CHIP or Medicaid, this can be done at any time.

How much is the penalty in 2014?

Starting this year, the penalty is calculated in one of two ways. If you and your dependents don't maintain the minimum essential coverage, your fee could be 1% of our yearly household income. However, only the amount of income that is above the $10,150 tax filing threshold will be used to calculate the penalty. The maximum penalty is about the same as the national average cost for the Bronze level health plan.

If an individual's income is lower than the threshold, the fee will be $95 per person per year, and $47.50 per child under 18. Using this method, the maximum penalty per family is $285.
Here is an example of how the fee is calculated: If a single adult has a household income below $19,650, but more than $10,150, he or she would pay the $95 flat rate. A single adult with household income over $19,650 would pay an amount based on the 1% rate.

The penalty goes up every year. In 2015 it will be 2% of income or $325 per person. In 2016 and later years it's 2.5% of income or $695 per person. After that, the fees will be adjusted for inflation.

What happens when you are uninsured for part of the year?

If you are uninsured for just a portion of the year, simply divide the applicable fee by 12 and apply the monthly amount to each month you were uninsured. Important: If you are uninsured for less than 3 months, you won't have to make a payment.

When will the fees be paid?

Expect the fee to be paid on your 2014 federal income tax return. Most people will file this return in 2015.

While many people have complained about the fees for Obamacare, they are a necessary element of making the program a success. When someone without health insurance needs urgent care but doesn't pay for it, everyone else ends up covering it through increased healthcare premiums. However, when all the people who can afford it take responsibility for their own healthcare, the cost of healthcare will eventually go down.

If you pay the fee, you're not covered

Many people were initially confused about what happens when they pay the fee. Some believed they would be covered by paying it, but that is not the case. Unless you purchase health insurance you are still responsible for paying 100 percent of the cost of your medical care.

How to avoid the penalty

In order to avoid the government penalty for the uninsured, you must purchase a qualified health plan that provides "minimum essential coverage." This type of coverage includes any of the following:

  • Any employer-sponsored health insurance plan, including COBRA (this includes retiree plans)
  • Any Marketplace plan, or any individual health insurance plan you already have
  • Medicare
  • Medicaid
  • The Children's Health Insurance Program (CHIP)
  • TRICARE (for current service members and military retirees, their families, and survivors)
  • Veterans health care programs
  • Peace Corps Volunteer plans
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014

Which health plans don't qualify as coverage under Obamacare?

Certain health plans do not meet the minimum "essential coverage" and will not qualify as coverage in 2014. If this is the only coverage you have, you may still be required to pay a fee.

  • Coverage that is only for vision and dental care
  • Plans that only offer discounts at the point-of-service
  • Workers' compensation
  • Coverage that can only be used for a specific disease or condition

How can I qualify for an exemption from the penalty?

Some people with limited incomes and other special situations may qualify for an exemption to the fee. Visit the website, healthcare.gov, to learn more about these exemptions.
If you are assessed a fee and do not pay it, the IRS will hold back the delinquent amount from any future tax refunds, however there are no criminal penalties, liens, or levies if you fail to pay the fee.

Unemployed? Be careful not to assume that you will not be charged a penalty. It all depends on your household income and whether insurance would be unaffordable. The only way to determine if your income qualifies for an exemption is to fill out an application in the Health Insurance Marketplace.

If you still have questions about the Affordable Care Act and individual health insurance, speak with your Arizona health insurance broker.

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