If you have health insurance, you might have heard about the Affordable Care Act (ACA), signed into law in 2010. The ACA aims to provide more affordable health insurance coverage for the citizens of the United States. It includes provisions for Medicaid eligibility for low-income individuals and tax subsidies to make insurance more accessible. This act mandates that everyone must have health insurance, and failure to have it results in a tax penalty.
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But what about now? Do the same rules still apply to those without health insurance? Do people still need to pay the penalty for not having coverage? In this article, we will discuss the updates on the rule and everything you need to know about health insurance coverage.
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Why is not having health insurance considered illegal?
The Affordable Care Act’s Mandate, also known as “Obamacare,” required eligible Americans to obtain health insurance coverage that meets specific standards, known as minimum essential coverage. This requirement is called an “individual mandate.” While not having minimum health insurance is not a crime, it does result in a tax penalty, which was previously referred to as the “shared responsibility penalty.” The ACA also established a premium tax credit to help offset the cost of purchasing insurance through the healthcare marketplace.
As of January 1, 2019, it is no longer mandatory to have health insurance coverage at the federal level. However, several states still require their citizens to have insurance. The ACA continues to exist, but no penalties will be imposed on Americans who choose not to obtain health insurance. Approximately four million Americans each year opt to forgo health insurance now that the penalty has been lifted.
The new American Rescue Plan of 2021 states that all taxpayers with insurance purchased from the ACA Marketplace are eligible for the ACA premium tax credit. This is a significant advantage compared to the previous situation, where filers were deemed ineligible if their income exceeded 400% of the federal poverty line.
States Requiring Health Insurance
While the federal government no longer requires individuals to have health insurance, a handful of states have mandates in place regarding coverage or are trying to pass laws to make it mandatory. It is important to note that some states have imposed health insurance tax penalties, meaning that citizens must pay a fine if their insurance does not meet the state’s requirements. The following states currently require their citizens to pay a penalty if they do not have adequate health insurance:
- – New Jersey
- – California
- – Vermont
- – Massachusetts
- – District of Columbia (Washington, D.C.)
Other states attempting to pass legislation to require health insurance coverage include:
- – Connecticut
- – Rhode Island
- – Hawaii
- – Maryland
For states with mandatory health insurance, the rules for obtaining and maintaining coverage are similar to those outlined by the ACA. Individuals can obtain insurance through the state-run health insurance marketplaces.
Duration before Being Subject to Penalty
Individuals have a short coverage gap of approximately three months before they become subject to a penalty. Even if a person has multiple temporary coverage gaps in a year, the exemption only applies to the first gap. If you have a coverage gap of three months or longer, you are not exempt from any of those months. The short coverage gap rules apply only to the first taxable year when there is a continuous period of coverage.
Penalty Prices for Not Having Health Insurance
For states with mandatory health insurance, tax penalties apply for every month that an individual is not covered by health insurance. The Tax Penalty of 2018 states that individuals must pay 2.5% of their total household Adjusted Gross Income. This amounts to approximately $695 per adult and $347.50 per child. The tax penalty serves as a deterrent for not obtaining health insurance and can be seen as the cost of not having coverage. Over time, the cumulative cost of not purchasing health insurance can be significant. Additionally, individuals put themselves and their families at greater risk of financial debt due to unforeseen medical expenses.
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Options for Health Insurance Coverage
While there is no longer a federal mandate requiring health insurance coverage, there are still options available for obtaining coverage. Some employers offer different types of health insurance coverage as an employee benefit, which can provide affordable options without the need to shop around and compare prices.
Other options for health insurance coverage include:
1. Enrolling in a Healthcare Cost-sharing Program
Consider enrolling in a healthcare cost-sharing program if you still lack health insurance. This can provide an alternative to traditional insurance plans.
2. Applying for Medicaid
Medicaid is a government program that provides health insurance coverage for low-income individuals and families. Eligibility for Medicaid varies by state and is based on income and family size.
3. Enrolling During the Open Enrollment Period
The open enrollment period is the best time to obtain health insurance coverage. This period is updated annually, so it’s important to check the dates for the current year.
It is important for individuals to be informed consumers when it comes to healthcare. Negotiating discounts with healthcare providers can be challenging, but it is possible in some cases. Large member groups may have better negotiating power and can potentially secure better discounts. However, not having health insurance increases the risk of the financial burden if expensive medical care is needed and the individual lacks the funds to pay for it.
In conclusion, while it is no longer a federal requirement to have health insurance coverage, it is still important to consider obtaining coverage to protect against unexpected injuries and medical emergencies. Take the time to research and explore health insurance options that best suit your needs, priorities, and budget. Having health insurance provides a safety net and peace of mind in case of unforeseen healthcare expenses.