If you have health insurance, you might have heard about the Affordable Care Act (ACA), signed to become law in 2010. It aims to have more affordable health insurance coverage for the citizens of the United States.
Medicaid eligibility is made available for low-income people and the formulation of tax subsidies to achieve this aim. This act mandates that everyone must have health insurance, and fail to have it equates to incurring a tax penalty.
But how about today? Does the same rule still apply for those without health insurance? Do people even need to pay the penalty for not having health insurance?
We will discuss the updates on the rule and everything you need to know regarding health insurance coverage.
Why Is Not Having Health Insurance Considered Illegal?
The Affordable Care Act’s Mandate, otherwise known as “Obamacare,” required ineligible Americans for exemptions to get health insurance coverage. The health insurance should meet specific standards, termed as minimum essential coverage.
The requirement of having health insurance is called an “individual mandate.” Not having minimum health insurance is not a crime, but it equates to receiving a tax penalty which was otherwise known as the “shared “responsibility penalty.”
The ACA also formulated a premium tax credit to offset the expense of purchasing health insurance using the healthcare marketplace.
Starting January 1, 2019, it is no longer mandatory to have health insurance coverage at the federal level up to the present. Still, several states require citizens to have health insurance coverage.
The ACA continues to exist, but no penalties will be imposed for Americans who do not want to get health insurance. Approximately four million Americans yearly opt not to get health insurance since the sentence has been uplifted.
The new American Rescue Plan of 2021 indicates that all taxpayers with insurance purchased from the ACA Marketplace are eligible for the ACA premium tax credit.
This advantage is excellent compared to the situation before wherein filers were deemed ineligible if their income exceeded 400% of the federal poverty line.
States Requiring Health Insurance
Although the federal government no longer requires you to have health insurance, a handful of states have mandates on the books regarding coverage or are trying to pass laws to make health insurance mandatory.
With this, it is crucial to remember that some states have still imposed health insurance tax penalties. It means that citizens need to pay the fine for not having health insurance when they reside in the area.
Here, we listed the states listed where citizens are required to pay tax when their health insurance does not meet their state requirements:
- New Jersey
- California
- Vermont
- Massachusetts
- District of Columbia (Washington, D.C.)
Other states attempting to pass legislation:
- Connecticut
- Rhode Island
- Hawaii
- Maryland
For states with mandatory health insurance, the rules for acquiring and maintaining coverage are similar to those indicated by the ACA. The insurance coverage is available through the marketplaces of health insurance that the state runs.
Duration before Being Subject to Penalty
Citizens have approximately less than three months that serve as a short coverage gap before they are subject to a penalty. Even if a person has multiple temporary coverage gas yearly, the exemption is only applied to the first gap.
Suppose you have a coverage gap for three months or more significant; you are not exempted for any of those months. Without the coverage for a continuous period starting in one taxable year and ending in the next, the short coverage gap rules apply to the first taxable year.
The months in the second taxable year that are part of the continuous period are not counted. The rule counts for the months in the first taxable year to apply short coverage gap rules to the following year.
Penalty Prices for Not Having Health Insurance
For states under mandatory health Insurance, tax penalties apply to all the months you are not covered with health insurance. The Tax Penalty of 2018 indicates that you must pay 2.5% of your total household Adjusted Gross Income.
This percentage is equivalent to approximately $695 per adult and $347.50 per child. The tax penalty is the exchange or opportunity cost of not getting health insurance.
Think of it like you are losing $2,085 worth of savings for the cost of health insurance.
Cumulatively, you will generate a considerable amount of net cost if you continue not to purchase any health insurance coverage through the years. Moreover, you are placing yourself or your family at greater risk of financial debt with unforeseen medical expenses.
Options for Coverage of Health Insurance
There is also an advantage to not having mandatory health insurance. One advantage is that you no longer have to spend on premiums since health insurance is no longer being mandated at the federal level.
Some employers offer different types of health insurance coverage as an employer benefit, so this enables you to get affordable coverage without much effort to shop around and compare prices. Here we listed some of the options you can look at for health insurance coverage:
- Enroll in a Healthcare Cost-sharing Program
- Apply for Medicaid
- Enroll During the Open Enrollment Period
Enroll in a Healthcare Cost-Sharing Program
You might want to consider enrolling in a healthcare cost-sharing program if you still lack health insurance.
For those who have second thoughts on canceling their health insurance plans since coverage is no longer mandatory, you can also consider a healthcare cost-sharing program.
Apply for Medicaid
Another option that you can check out is to apply for Medicaid. It is vital to note that specific qualifications determine whether you can get Medicaid or not. These qualifications depend on your income and the size of your family.
The eligibility for Medicaid coverage varies from state to state. One form can have an entirely different set of guidelines regarding income and asset thresholds for eligibility.
Enroll During the Open Enrollment Period
The best time to get health insurance is during the open enrollment period. This schedule is updated on an annual basis so you can check when the free enrollment period will be for the current year.
You must be a wise and strategic healthcare consumer to get discounts from providers. Not all health insurance providers agree to give discounts since it takes a great deal of negotiating with hospitals and physicians to decrease prices.
Of course, you can expect to get better discounts with large member groups since more people will be purchasing health insurance. There is also a downside of not having mandatory health insurance. More people now need to choose the self-pay route.
By being health-insurance-free, you increase the risk of financial risk if you need expensive medical care and lack the money to pay for it from your pocket or salary.
Final Takeaways
Even though the federal law is not requiring everyone to have health insurance coverage anymore, this does not automatically mean you don’t. You can save money by not having health insurance because you will not have to pay any premiums; however, you are putting yourself at financial risk with no support for unexpected injuries.
Allot time to check and read up on health insurance options to find the best suits you. Select the option that fits your priorities, needs, and budget. After all, it is always better to have health insurance on standby than not having any support in unexpected injuries and medical emergencies.
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Liked this post? Read more on other health insurance-related topics. Make sure to check out other informative posts here:
- Health Insurance Penalty: A Guide Of What It Involves And How To Avoid It
- What You Should Know About Blockchain In Insurance In 2021
- 3 Tips to Find the Cheapest Health Insurance Rates
Let us know in the comments if you have learned something new today. Feel free to share any other valuable information that you might have about this subject.
