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The Waiting Period When Changing Health Coverage

To sum it up...
  • When starting a new job, an employer can initiate a waiting period of up to 90 days before providing an employee with health insurance
  • If you will be without health insurance for more than three full months during this waiting period, you may want to consider getting a health insurance plan in the meantime or you will be responsible for paying the penalty fee
  • You may eligible for special enrollment during this waiting period. However, the special enrollment period will end 60 days after you lose your coverage

90-Day Waiting Period for Employer Health Insurance

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The maximum amount of waiting time for health insurance through an employer is 90 days.

Employers can choose exactly how long their waiting period is at their own discretion, as long as it is within the 90-day maximum.

If you do not have health insurance during this time, it is recommended that you purchase coverage through the Health Care Marketplace to avoid being without coverage for an extended period of time and prevent you from having to pay the penalty fee.

This is also beneficial for you because you will already have continuous coverage in case you lose your job or have your hours cut before your employer based health insurance starts.

If your employer’s waiting period is less than three full months, you will most likely be eligible for the short coverage gap exemption and not be responsible for paying the penalty fee.

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Short Coverage Gap Exemption

The short coverage gap exemption allows you to have one short lapse in coverage a year that is less than three full months long. The three full months must be in a row and you will need to have coverage for at least one day in that third month. You will claim this exemption as Code B.

There are a few other coverage gap exemptions that may be applicable in this particular situation. If you lost coverage for more than three months, you can still claim the Code B short coverage gap exemption for the first time and only owe the fee for the subsequent months that you went without coverage. However, you must have coverage at some point in the year to qualify for the short coverage exemption.

How much is the fee if I do not have insurance during the waiting period?

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If you go without health insurance coverage for the maximum 90 day waiting period and it extends for a full three months, you may be responsible for paying the fine. This fine can be calculated in one of two ways. It is either a percentage of your annual household income or a specific amount for each person without health insurance coverage, depending on which amount winds up being higher.

The fee for 2016 is $695 per person and $347.50 for each child in the household under the age of 18 or 2.5 percent of your annual income.

There is a maximum limit set on these amounts. The maximum for the percentage of income calculation is equivalent to the national average price of a Bronze plan that is sold through the Health Care Marketplace. The maximum per person amount is $2,085.

However, you only have to pay for the months that you went without coverage and every month you had coverage counts, so you will pay less!

You will pay the fee when you file your taxes for that previous year. If you had coverage for a portion of the year, you will pay 1/12th of the annual amount that you would owe for each month that you and your dependents went without coverage during that year.

If you are unemployed or health insurance coverage is not affordable for you during your waiting period, you may qualify for additional exemptions.

If you do not pay the fee when you are supposed to, the IRS will hold back the amount from any future tax refunds. There are no liens, levies, or criminal penalties for not paying the fee.

Special Enrollment Periods

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If you are changing jobs and need to purchase new health insurance coverage, you may qualify for a special enrollment period that is separate than the open enrollment period which ended on January 31, 2016.

If you are switching to an employer plan from a non-employer plan, you are generally entitled to a special enrollment period of up to 30 days.

If you are going to be losing your job or experiencing a reduction in hours that will disqualify you from full time employee status, you are eligible for a special enrollment period of 60 days to enroll in coverage from the health care marketplace.

There are several other life events that may qualify you for a special enrollment period. These life events include getting married, being denied Medicaid or CHIP, giving birth or adopting a child, permanently moving to a different area that offers different health care options, or becoming a citizen or legal resident.

All of these life events usually entitle you to a 60 day special enrollment period. In many cases, you may be eligible for enrollment 60 days before the life event occurs. This can prevent you from experiencing a lapse in your health insurance coverage.

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