Maybe you missed the deadline. Maybe you just didn’t want insurance. What happens now?
Unless you qualify for a hardship waiver, or meet one of a few exceptions (like being in prison or a member of certain Indian tribes), you’re going to have to pay a fine.
New health reform laws required that most Americans purchase health insurance starting this year. The deadline for open enrollment was March 31, although many people were able to get an extension if they tried to sign up on healthcare.gov by that day
The law says that if you didn’t get insurance (or have it already through your employer or through government-assisted plans such as Medicaid and Medicare), you have to pay a penalty. You might have heard it called an individual mandate. Depending on your household income, that could mean a fine of a few hundred dollars.
The penalty (which will be calculated when completing your 2014 federal income tax returns in 2015 and really should be something you consult a tax advisor on for more information) is calculated like this: If you or your dependents don’t have insurance that qualifies as “minimum essential coverage,” you have to pay whichever is higher—1 percent of your yearly household income, or $95 per person for the year. (Although it’s $47.40 per child if the child is under 18.) If your income is below $10,150, there’s no penalty.
The fee is applied as part of a tax return—so if you didn’t buy insurance, you’ll be fined when you file your 2014 taxes next year. A tax advisor or accountant can help you figure out what you owe. In fact, as I mentioned, we encourage people to consult a tax advisor for this.
The healthcare.gov website explains the reasoning as such: “When someone without health coverage gets urgent—often expensive—medical care but doesn’t pay the bill, everyone else ends up paying the price. That’s why the health care law requires all people who can afford it to take responsibility for their own health insurance by getting coverage or paying a fine.”
Some people might think it’s cheaper to just pay the penalty than to get health insurance.
But look at it this way: Say you make $30,000 a year. It might cost you $300 a month for an insurance plan. The penalty would be $300. So why not just pay the $300 one time?
First of all, paying the penalty doesn’t mean you’re covered by health insurance. You’re still responsible for your medical care. What happens if someone in your family gets sick? Studies have shown that medical bills are the biggest cause of bankruptcies in the United States. Millions of people struggle with the cost of health care every year.
Health insurance is extremely critical to a financial plan. It doesn’t take much of a stay in the hospital, or significant treatment, to rack up a lot of household debt.
And the fines will only increase. The penalty is scheduled to go up every year – in 2015, it’ll be 2 percent of one’s gross income, then 2 ½ percent the following year. After that, it’ll be adjusted by inflation.
If you missed the March 31 deadline to purchase insurance through the government marketplace (or have an extension), the next enrollment period begins Nov. 15. Until then, one can only sign up if there’s a “qualifying event” such as changing jobs, marriage, birth, death, adoption, relocation, loss of group insurance or loss of an individual plan.
You can also still apply for Medicaid or the Children’s Health Insurance Program, (CHIP).
There are short-term health plans available, but to get one, you have to go through medical underwriting and answer medical questions that will determine how much coverage you can get.
You’d still have to pay the government penalty. But you’d have health insurance.