Uninsured? What You Need to Know About Obamacare

Most Americans have to maintain health insurance coverage

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Uninsured? Wondering if you have to buy health insurance because of the Affordable Care Act? Here's what the law requires, how to comply, how to get Obamacare if you want it, and what your alternatives are.

Do I Have to Get Health Insurance?

If you're uninsured and you don’t have a health insurance exemption, you need to get health insurance. If you don't, you'll be assessed a penalty when you file your income tax return. The Affordable Care Act’s individual mandate requires everyone who’s not exempt to maintain health coverage. This has been the case since January 1, 2014.

If you have health insurance through your job or a government program like Medicare, Medicaid or Tricare, that insurance satisfies the law’s requirement. You don't need to do anything else.

If you have an individual health plan, your insurer can tell you if your current policy meets the definition of minimum essential coverage. That's not the same thing as being ACA-compliant however. If you have an individual market plan that took effect before 2014, it's almost certainly not fully compliant with the ACA, but it's still considered minimum essential coverage as long as it's major medical health insurance.

If it's major medical health insurance and you've had it since before 2014, it's either grandmothered or grandfathered. In both cases, you can continue to have this coverage for as long as your health insurance carrier allows it, and you won't be penalized - despite the fact that your plan is not compliant with the ACA's requirements for new plans.

On the other hand, if the only insurance you have is a plan you purchased yourself that is NOT considered minimum essential coverage, you won't be in compliance with the ACA's individual mandate, which means you'll be subject to the penalty unless you've got an exemption. Plans that don't count as minimum essential coverage include things like short-term health insurance, accident supplements, critical illness plans (ie, a policy that covers specific diseases only), and limited benefit plans. If in doubt, check with the company that sold you the plan.

If you’re uninsured, you'll have to get health insurance. If not, you'll be charged the penalty when you file your taxes, unless you've got an exemption.

Is There a Way Out of Buying Health Insurance?

If you’re uninsured and not interested in getting insurance, getting a health insurance exemption will help you avoid a tax penalty. To find out if you qualify for an exemption and how to get an exemption certificate, read “Can I Get a Health Insurance Exemption?

What Will Happen if I Don’t Get Health Insurance?

If you’re not exempt and you choose not to get health insurance, you’ll owe a tax penalty called the shared responsibility payment. This penalty increases over time, and the amount depends on your income.

The penalty was first assessed in the spring of 2015, when people filed their 2014 tax returns. Because so many people were caught off guard by the penalty, the government agreed to offer a special enrollment period that year for people who didn't know about the penalty until they filed their 2014 tax returns. They still had to pay the penalty for 2014, but the special enrollment period gave them an opportunity to get coverage for most of 2015.

Penalties for 2016 will be assessed when people file their tax returns in early 2017. For tax filers who owed a penalty on their 2014 tax returns, the average penalty amount was about $200. That's expected to increase to almost $1,000 for tax filers who owe the penalty on their 2016 tax returns.

The health insurance penalty rules can be complicated. For example,

  • Part of your income isn’t included when figuring the penalty amount - only the amount above the tax filing threshold is counted.
  • There’s an upper limit to the penalty you’ll have to pay if you’re wealthy - it's the national average cost for a bronze plan, which was $2,484 for a single individual in 2015, and $12,240 for a family of five or more.
  • There’s a minimum amount you’ll have to pay even if you're poor (assuming you don't qualify for an exemption). For 2016, the minimum penalty is $695 per adult, and $347.50 per child, up to a maximum of $2,085 for the household.

If you’re weighing the cost of buying health insurance against the cost of paying the health insurance penalty, don’t forget to figure related costs into the mix. Costs that go along with the choice to remain uninsured include the cost of paying out-of-pocket for all of your health care expenses, not just the cost of the tax penalty. Also, a government health insurance subsidy, if you’re eligible, could lower the cost of buying health insurance.

Can I Get Help Paying for Health Insurance?

You could be eligible for a subsidy to make health insurance more affordable. The Affordable Care Act created two types of health insurance subsidies; both are income based.

The premium tax credit subsidy pays part of your monthly health plan premiums so buying health insurance is less expensive. It’s like getting a discount on the cost of health insurance.

The cost-sharing subsidy lowers your deductible, copays and coinsurance when you use your health insurance. Your health plan pays more of your medical expenses, and you pay less. It’s like getting a free upgrade on health insurance.

Lastly, if your income is low, you might be eligible for Medicaid. Most Medicaid programs don’t charge any monthly premiums for coverage, or charge a very small amount. The ACA called for expansion of Medicaid, but the Supreme Court made it optional for states to participate. As of June 2016, 31 states and DC have expanded their Medicaid programs, but 19 states have not.

Learn more about how the subsidies work and whether you’re eligible for a subsidy to enroll in Obamacare by reading “Can I Get Help Paying for Health Insurance?

How Do I Buy Health Insurance?

Although you can buy health insurance directly from a health insurance company (ie, "off-exchange"), if you suspect you’re eligible for a subsidy, buy your health insurance through your state’s health insurance exchange, otherwise known as a marketplace, instead.

Subsidies can only be used for health insurance you buy through the exchange. Regardless of whether you want to take your subsidy up-front in monthly payments to your health insurance carrier, or claim it later on your tax return, it's only available if you buy your plan through the exchange.

The exchange can also tell if you’re eligible for Medicaid and help you apply for it. In some states, all Medicaid enrollment is done through the exchange. In other states, you can enroll directly through the state Medicaid office, or through the exchange. In all states, the exchange can get you enrolled in Medicaid if you're eligible.

Even if you’re not eligible for Medicaid or a subsidy, you state’s health insurance exchange makes it easy to compare health plans. Since the plans offered through the exchange are in direct competition with each other, they may have lower monthly premiums than similar health plans from other carriers that are only offered outside the exchange (although even outside the exchanges, all available major medical plans have to be fully compliant with the ACA).

How Do I Pick the Best Plan?

To pick a health plan that best fits your needs, you first need some basic information about what's available.

All of the health plans sold on health insurance exchanges - as well as those sold off-exchange, as long as they're major medical coverage - provide the same essential health benefits. Some plans may provide benefits above and beyond the essential health benefits.

All of the plans are categorized into one of four standard tiers. These tiers tell you the plan’s value. You can learn more about how the tiers work and which one might be the best fit for you in “Bronze, Silver, Gold & Platinum—Understanding the Metal-Tier System.” An additional health plan option, catastrophic health insurance, is available to people less than 30 years old, or people with a hardship exemption.

Most exchanges have several different types of health insurance offered at each value level. For example, if you want a silver-tier health plan, you might have to choose between a silver HMO, a silver PPO, and a silver POS plan. If you aren't sure how different types of health insurance work, read “HMO, PPO, EPO & POS—What’s the Difference & Which Is Best?


Internal Revenue Service, Individual Shared Responsibility Provision - Reporting and Calculating the Payment. 

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