One of the essential purchases you would have to pay in real life is insurance. Aside from home or car insurance, you would also need to invest in health insurance too.
There may be times when we would not be able to pay for any of these purchases in real life. With that in mind, let us explore health insurance penalties and how we can avoid them.
Before that, do watch this short video on how you can save money while using your health insurance this 2020:
What is the individual mandate act?
The individual mandate act was written as an amendment to the Affordable Care Act (ACA). The ACA was passed during 2010 and consisted of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.
The goal of the ACA was to improve the coverage of Americans with health insurance and reduce healthcare-related costs for both the consumers and the federal government. From 15% in 2013, the rate of uninsured Americans was dropped to 10.9% at the end of 2016.
The following is a list of the significant parts included in the ACA:
- More health plan options.
- Creation of an online marketplace for people to buy their health plans and health plan providers to sell them.
- How to apply for health insurance.
- Financial penalties for not getting a health insurance plan.
- Health insurance coverage gaps.
One of the finer points of this act was the shared responsibility provision. It states that every American should maintain a health insurance plan or be fined with a tax penalty. That rate was $695 for any uninsured adult or 2.5% of household income, whichever is greater.
This changed during 2017 as the current administration was able to repeal the individual shared responsibility penalty. It was enacted during the December of that year, so those uninsured in 2018 would still have to pay for it while those from 2019 onwards wouldn’t.
During 2018, the current administration made an amendment where it gave more people hardship exemptions from the individual mandate penalty. It includes provisions that a person will be exempted if they only have one insurer or reject a plan with abortion coverage.
People who are unable to get their health insurance coverage under a qualified health plan (QHP) due to personal circumstances are also included in these exemptions. This includes people who need a specific physician for their treatment but are not covered on any available exchange plan networks.
However, even if this restriction was lifted a few years ago, several states have their versions of an individual mandate penalty. This is included in Massachusetts, New Jersey, Washington D.C., California, Rhode Island, and Vermont.
Relevant: Also read the basics of hospital indemnity coverage here
This state has its preexisting mandate since 2006 to get their health insurance or pay a fine. It is based on any household’s income level with the Federal Poverty Line (FPL). The FPL is based on an individual income per year that the government has set.
They amended this in 2019 where anyone making at most $150 and below the poverty line are exempted from paying this. Aside from that, those who were making 150.1% to 200% of the FPL and are uninsured will have to pay half of the lowest price on their health insurance marketplace.
Meanwhile, those who were making 300% of the FPL will be charged based on half of the lowest prices bronze premium plan. This is based on the prices posted on January 1, 2019.
Married couples were included in this change too. For them, their penalty will be the sum of their penalties.
New Jersey mandate
As this state knew that the individual federal mandate was to be repealed, they created a new law to replace that. It took effect in 2019 and includes a tax penalty at the state level.
For them, having no insurance due to not getting one or not qualified meant that you need to pay the tax penalty per month. Take note that if you are not required to file for a tax return, this means you are exempt from this fine.
As an example, the minimum max penalty for a person living in New Jersey is $695, and the maximum was $3,012 in 2019. Meanwhile, a family of 5 with a household income of $200,00 and below would pay between $2,085 to $9,500.
Washington D.C. mandate
Their mandate was also placed due to the incoming removal of the shared responsibility provision. Aside from that, they made it as part of their “Get Covered, Stay Covered” campaign. This was made effective in 2019.
In this state, you would have to pay the higher amount: a total of $2,085 for each uninsured person in your household or 2.5% of your household income.
Take note that you wouldn’t have to pay for this while you are living in this state if you are qualified due to financial hardship, eviction, or pregnancy.
Their reasoning to create their own shared responsibility mandate was to keep the average price of their premiums 3.2% lower in the upcoming year. That means that it would help each person living in this state to save up to $167 per year.
If, for example, you are living there and can afford to pay for health insurance, but you refuse to get one, you would get a tax penalty. This penalty is decided whether $696 per adult or 2.5% of your household income takes the higher one. Take note that the $696 will rise yearly with inflation in place.
Rhode Island mandate
They started implementing a mandate for this year. A resident of Rhode Island will have to pay it if they are unqualified for an exemption in the following year.
Theirs has a similar provision as the Washington D.C. mandate i.e $2,085 or 2.5% of the household income. The cut from one’s household income has the same rate as a health insurance bronze plan.
In March 2018, their House of Representatives passed their mandate. It took effect on January 1 this year.
However, unlike the previous states, their mandate law does not have provisions on whether there will be tax-based penalties or another form of punishment. Instead, a working group is tasked to create recommendations for the legal representatives.
As of the writing of this article, there have been no updates about any of the recommendations for their mandate law. However, their current stance on the matter is that individuals are required to have their health insurance, but there is no penalty for having none
Tips on how to manage health insurance penalties
After we learned which states have these penalties, let us see how we can save money and avoid getting any of these.
As an individual
If you are an adult, the basic step to preventing getting into penalties is to enroll in a health insurance plan during the open enrollment period. To cover this year, you should have signed up for one between November 1 to December 15 last year.
However, if your insurance expires in the middle of the year, you can qualify for a special enrollment period or enroll in a short-term health insurance plan.
These rules apply the same way if you want to keep your children covered. Remember to sign them up to one too, or else you might be fined for not including a plan.
If you are stuck on looking for one, there are three options: subsidized health insurance, short-term health plan, and Medicaid.
Subsidized health insurance
A subsidy is an amount of money that the government will pay towards a portion of your entire health coverage. This amount depends on your income. Two types are available:
- Premium tax credit subsidy – allows you to pay as little as $1 per month for a health plan
- Cost-sharing subsidy – helps you get a lower cost for your total monthly health expenses, such as your deductible, coinsurance, and out-of-pocket maximum
Short-term healthcare plans
When looking for these healthcare plans, take note that these may not be qualified under the ACA. This is due to them being unable to meet the coverage and benefit requirements of said law.
Plan ahead as some of these plans can only cover for several months, and you might need to reapply for another plan. Also, getting one of these plans will forfeit you from getting HIPAA plans.
Only apply for these plans in the following situations:
- Unable to get major medical coverage.
- Proof of insurance for special activities.
- Waiting for Medicare coverage.
This type of health program aims to provide access to millions of Americans, including low-income people, families, pregnant women, the elderly, and people with disabilities.
You can be qualified under this program depending on your income level and where you are living. This guide can help you learn whether you are qualified in your place of residence.
Employed under a company
Once you are employed under any company, the first thing they would sign you up for is your health insurance plan. This includes several documents regarding specific information about it, including figures about premiums and deductibles.
Second, after getting these documents, you can compare your current plan with other plans. You can use reports such as ones made by the Kaiser Family Foundation to check other employer-sponsored health plans.
Third, if you find out that you are paying more for less coverage in your job, you should ask your employer to switch to a better plan or switch employers entirely.
If you are self-employed, you can get covered by a health insurance plan through a comparison shop. This includes browsing websites such as eHealthInsurance.com to check which insurance company has the best coverage for the best price and customer service.
Besides looking through the best deal through a comparison site, you should also note a plan with a lock-in rate. Even if you would pay a few dollars extra a month in exchange, that means you can get the best price for the plan.
Finally, you can save money for your taxes while getting covered at the same time. This can be done by getting a health savings account (HSA). After you deposit your money in an HSA, it can be used to pay for your future health-related expenses.
Take note that health insurance plans for small businesses are available through state-run “exchanges” or marketplaces. Under the ACA, it is defined as a company with at most 25 employees.
However, the same law does not require businesses that have less than 50 employees to provide health insurance. Even so, these employers can get health insurance for them through a SHOP exchange.
For those with more than 200 employees, you would have to note the following guidelines from the ACA:
- All new employees are required by the employer to enroll in a health care plan.
- Employers should give a notice of their employees’ right to opt-out of automatic enrollment.
- Employers with more than 50 employees that do not provide insurance must pay $2,000 for each employee, even if at least one gets them by themselves.
- Employers with more than 50 employees that let anyone obtain a subsidy to pay for insurance will be fined per worker.
As a retiree
If you want to help your parents or grandparents get through their retirement, here are several tips that you can follow:
- Ask for the retiree plan from your retired relative’s last employer.
- Talk to a local government representative about a program regarding retirees.
- Contact their last insurance provider to ask to be covered under COBRA.
- Enroll under your spouse’s or husband’s health plan before they retire.
- Inquire about Medicare.
In this article, we explored the present state on health insurance penalties. As of this article, there are existing laws in individual states about not being protected by a policy.
After that, we explored the several options you may have to avoid getting these penalties. Do take note that you should talk to your local insurance provider about it too. That way, you can keep your health and savings in check at the same time.
Did this article help you think more about where you put your money? Read these articles to help you save you and your wallet:
- What is Hazard Insurance and Why is It Important?
- How insurance companies earn revenue?
- Your guide to medical insurance
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