Okay, we know. This isn’t the most exciting topic you like to think about, but it is a necessary one to know about. So we’re going to make it easy for you to follow by breaking it all down.
First, the full name for the Affordable Care Act is actually the Patient Protection and Affordability Act. It has also become popularly known as Obamacare. The Affordable Care Act became a law on March 23, 2010. Its purpose was to revamp the healthcare system and make it affordable for everyone to have health coverage. As a result of the law, every state now has its own marketplace. At your marketplace’s website you can enroll in a plan and also determine if you qualify for any financial assistance.
It’s mandatory that you have a health coverage plan. Not having one can cost you a penalty. Some people refer to the penalty as a “fee,” “individual mandate,” “individual responsibility payment,” or “fine.” Regardless of what it is called, it’s hard earned money out of your pocket and the IRS will collect the penalties from any future tax refunds that are due to you.
You can only avoid penalties if you have health insurance or have a coverage exemption.
The Penalty If You Don’t Have Health Insurance
Why give Uncle Sam money if you don’t have to?
Penalties are calculated in two ways. You’ll be paying the higher of the amounts described here.
- For 2016, the penalty is 2.5% of your yearly household income. For specific penalties and how they apply to your household you should ask your tax advisor
- A $695 per person per year ($347.50 per child who is under 18 years old).
If you’re thinking you’ll just get an exemption and avoid getting health insurance and also avoid the penalty…hold on. Make sure you qualify for an exemption before spending your penalty money on a new BBQ set.
Here are some ways you can be exempt:
Existing Health Coverage Exemptions
- Any individual insurance plan you already have
- Any job-based plan, retiree plans or COBRA plans
- Medicare Part A or Part C
- Most Medicaid coverage
- The Children’s Health Insurance Program (CHIP)
- Certain types of veterans health coverage through the Department of Veterans Affairs
- Most TRICARE plans
- Department of Defense Non-Appropriated Fund Health Benefits Program
- Refugee Medical Assistance
This list has some of the other exemptions available. Use the health coverage exemption tool to find more exemptions that may be available to you.
- If the lowest priced health coverage available to you costs you more than 8.05% of your household income
- If you don’t have to file a tax return because your income is below the filing requirement level
Group membership exemptions
- You belong to a federally recognized Indian tribe or are eligible for services through an Indian Health Services provider
- You’re a member of a recognized health care sharing ministry
- You’re a member of a recognized religious sect with religious objections to health insurance
- You’re serving time in jail or prison
- You live outside the United States
- You are homeless
- You have been or will be evicted or facing foreclosure within the past 6 months
- Your utility company sent you a shut-off notice
- You were a recent victim of domestic violence
- A close family member recently died
- You had a fire, flood, or other disaster that caused major damage to you property
- You had a bankruptcy filing in the last 6 months
- If within the last 24 months you accumulated medical expenses you can’t pay
- You’ve acquired unexpected expenses because you’re caring for ill, disabled, or aging family member