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When is it illegal to not have health insurance?

“To sum it up…”

  • The Affordable Care Act was signed in 2010
  • Those without health insurance coverage may receive penalties
  • Penalties are assessed when a taxpayer files federal returns
  • Citizens must purchase insurance by January of a calendar year
  • Open Enrollment in the Health Care Marketplace occurs once a year
  • Fees for not having insurance increase every year

Having Health Insurance is Required by Law


It is now required by law to have health insurance because of the Affordable Care Act. If you can afford to purchase health insurance for yourself and family, if applicable, but choose not to get it, you may be penalized with a fee.

The fee for not having health insurance can be referred to as a “fine,” “penalty,” or “individual mandate.” The fee is applied when you file your taxes.

What’s the Affordable Care Act?


If you’re not familiar with the terms Affordable Care Act, you’re probably familiar with the term Obamacare.

The two names are, in fact, the same program. Obamacare is a nickname given to the healthcare policies created under Obama’s presidential term.

The Affordable Care Act, which is responsible for requiring Americans to purchase healthcare insurance, was signed into law by President Obama on March 23, 2010, after it was passed by Congress. The act was met with much controversy.

Finally, on June 28, 2012, the act was determined legal by the Supreme Court.

When the Affordable Care Act was signed in 2010, it was set to be implemented over a four-year period. The roll-out period began as follows:

  • 2010 – Patient Bill of Rights was Introduced (protected consumers from insurance industry abuse).
  • 2011 – Patients with Medicare began to receive free preventative services and discounts on prescriptions.
  • 2012 – Accountable Care Organizations were Created (designed to help doctors provide better services).
  • 2013 – Open enrollment in Health Care Insurance Marketplace Began (started October 2013).
  • 2014 – All Americans have access to affordable healthcare through the Health Care Insurance Marketplace.

Why the Affordable Care Act was Created


When Obama ran for presidency, one of his promises was to put consumers back in charge of their healthcare. To do this, he created the Affordable Care Act, which was designed to make health insurance more affordable and accessible.

On top of that, the act also allowed families, seniors, and small business to access health insurance that would allow them to seek higher quality care. The people who benefited most from this program were those that were previously uninsured. Additionally, those that could only afford catastrophic insurance also had access to better coverage.

To ensure that citizens would purchase insurance provided by the Health Insurance Marketplace, the act included penalties for those that failed to meet the requirements of the program.

The penalty is applied when a person or household files federal taxes. The fees for not having health insurance have increased since 2014 and will continue to increase in the future.

For most people, the cost of not having health insurance is much more than it would cost to buy a sufficient plan from the open marketplace.

How much is the fee for not having health insurance?


The fee for not having health insurance is not the same for every person or household. There are two ways the fee can be calculated. The first method is a percentage of your annual household income.

The second method is a certain amount for each person in your household that doesn’t have health insurance. The fee can be accessed if you are uninsured for more than three months, despite having access to affordable healthcare coverage.

The fee in 2015 for not having health insurance was $325 per person, or 2-percent of a person’s annual household income, whichever is higher. In 2016, the fee is increasing to $695 per person.

The annual percentage rate for household income is also increasing to 2.5-percent. Again, the fee assessed will be whichever is higher.

Interestingly, the amount a person could pay in penalties for not having insurance is more than a policy would cost through affordable health care options.

Penalties for Not Having Health Insurance are Based on Coverage Throughout the Year


If you find yourself without health insurance for one or two months, you’ll probably be able to avoid the tax penalty.

The fee is based on how many months your household went without qualifying healthcare coverage. The longer a household is uninsured, the higher the penalty fee will be.

Who is exempt from buying health insurance?

Affordable health care plans are offered in a free marketplace. However, even at reduced prices, some people cannot afford policies. Under tax laws, those with a very low income may be exempt from being required to have health insurance.

It may be possible for someone that meets specific conditions to also be exempt from being required to buy health insurance. If a person or household is exempt from buying insurance, they will not have to pay a fee.

Possible Health Care Coverage Requirement Exemptions


In rare instances, you may be granted an exemption that does not require you to pay a penalty for not having health insurance.

Below is a list of possible exemptions:

  • Marketplace coverage was deemed unaffordable
  • Short coverage gap (one to two months)
  • Income is below the minimum guidelines for filing a tax return
  • American Citizen Living Abroad
  • Certain Non-Citizens
  • Member of a Health Care Sharing Ministry
  • Member of an Indian Tribe
  • Incarceration
  • Some religious sects
  • Financial hardship
  • Coverage will be unaffordable based on projected income
  • Ineligible for Medicaid
  • Americorps coverage
  • Unable to renew existing coverage

Qualifying for an exemption listed above is not a guarantee. Exemptions for not having health insurance during a required calendar year is done when filing taxes.

Health care exemptions only apply to federal tax returns.

When Do You Have to Buy Health Insurance?


To be considered covered, you need to purchase health care by January 31st of a year. If you don’t buy marketplace insurance by the final deadline, you may have to wait an entire year before being eligible to buy insurance again.

What this means is you will most likely have to pay the fee for not having insurance when you file your yearly taxes for the previous year.

If you are weighing the pros and cons as to whether you should purchase health insurance, you have to weigh the consequences of having an expensive procedure or medical emergency.

Without insurance, you will be responsible for the costs and will also be penalized for not having insurance as well. The added costs would likely skyrocket past what an affordable policy would have cost.

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  1. https://www.hhs.gov/healthcare/about-the-law/read-the-law/
  2. http://www.hhs.gov/healthcare/facts-and-features/key-features-of-aca-by-year/index.html
  3. https://www.irs.gov/affordable-care-act/individuals-and-families/aca-individual-shared-responsibility-provision-exemptions
  4. https://www.healthcare.gov/blog/the-fee-for-not-having-health-insurance-2016/