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When do I have to have health insurance to avoid penalty?

Keep in mind...
  • Every US citizen or resident must get and keep insurance coverage unless exempt
  • The rule covers the period that began January 1, 2014 and continues each year the ACA remains in effect
  • Eligible persons must have coverage on the first day of each calendar year
  • Eligible persons must maintain coverage each month of the year
  • Eligible persons include every citizen or resident unless exempted from the individual mandate

The month of January is the first month of the calendar year, and every person must have qualified health plan coverage on the first day of January.

The rule applies to everyone not exempt from the requirement such as foreign citizens, those without qualified income, and otherwise exempt such as residents without legal status.

Those not required to file taxes, lacking affordable options, or who meet specific criteria are exempt.

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The Individual Mandate Requires Coverage or Penalty

The law requires that every person get and keep health insurance. The rule is the individual mandate of the Affordable Care Act. It is the legal foundation of universal coverage in the US.

It is the national requirement that every person must have health insurance. Those who can afford insurance but choose to go uninsured must pay a tax penalty.

Coverage Requires a Qualified Health Plan

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The penalty will apply if the health insurance coverage does not meet federal standards. To qualify, it must contain the 10 essential benefits.

All policies sold on the federal marketplace website and the state exchanges meet federal standards. Some policies sold only of marketplace or state exchanges also meet federal standards.

Coverage that does not meet the ACA requirements would expose the holder to the personal responsibility penalty. When selecting plans, consumers will get the maximum advantage by comparison shopping to find the match for the individual or family situation.

Medicaid and CHIP Coverage Satisfy the Individual Mandate

Those that cannot afford health insurance can get coverage under the Medicaid program for low-income persons and the children’s program for minors. Medicaid and CHIP meet the requirements for qualified health coverage in the ACA.

The Penalty for No Health Insurance

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Those who can afford the required insurance and choose to go uninsured face a tax and penalty. Called the individual shared responsibility payment, the penalty reflects the price of the benchmark bronze insurance plan. The penalty applies for each uninsured month up to a maximum annual amount. The below-described items, listed by year, detail the penalties for no insurance.

  • 2014 – The fee for not having insurance in 2014 was $95 per adult and $47.50 per child; for a family the limit is the greater of (1) one percent of household income above the tax return filing threshold for its filing status or (2) $285.00. The IRS assessed the penalty as 1/12th of the total amount owed for each uncovered month without an exemption.
  • 2015 – The fee for not having insurance in 2015 was $325 per adult and $162.50 per child; for a family the limit is the greater of (1) 2.0 percent of household income above the tax return filing threshold for your filing status or (2) $975.00. The government exacts the penalty as 1/12th of the total amount owed for each uncovered month with no qualified exemption.
  • 2016 – The fee for not having insurance in 2016 is $695 per adult and $347.50 per child; for a family the limit is the greater of (1) 2.5 percent of household income above the tax return filing threshold for your filing status or (2) $2,085. The IRS applies the penalty as 1/12th of the total amount owed for each uncovered month without an exemption.

Remedy for Part-Year Insurance

Those required to have insurance can avoid the penalty if they miss one or two months during a calendar year. The insurance gap remedy applies to those who miss three or fewer months due to reasons such as an economic hardship.

Types of Policies that Meet the ACA Standards

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The ACA offers four types of policies identified by metal tiers as platinum, gold, silver, and bronze. The tiers represent policies with similar actuarial values. The coverage divides costs between the insurer and the policyholder in a rough percentage.

The below listed items describe the percentage of coverage provided by the respective metal tiers. Comparison shopping is an excellent method for selecting among policies with similar value.

  • Platinum policies have the lowest deductibles and the highest percentage of insurance-paid coverage. These policies cover about 90 percent of costs and have highest premiums.
  • Gold policies cover about 80 percent or more of costs.
  • Silver policies cover 70 percent or more. These include flexible high-deductible policies and those eligible for health savings accounts.
  • Bronze policies cover approximately 60 percent of costs leaving forty percent for payment by the policyholder.

Focus when Selecting Qualified Plans

Avoiding the individual mandate penalties is important for consumers. Coverage and best fit are also important for value. Comparison shopping can focus attention on the parts of a plan that have particular importance to the consumer’s needs.

Comparison shopping focuses on costs, deductibles, medical services, and facilities. Through careful consideration, you can find the plan that’s both affordable and offers the best coverage.

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