What If I Have Concerns About Affording Health Insurance
Health insurance can be expensive, but the good news is there are quality health insurance plans available at an affordable rate. The even better news is that you may qualify for a new subsidy program for low and middle income California residents.
In the past, individuals that earned between 138% and 400% of the federal poverty level were eligible for federal tax credits through Obamacare. The new California program will extend premium tax credits for taxpayers who make between 400% and 600% of the federal poverty level. This means individuals who make between $50,000 and $75,000 per year will qualify for subsidies and families who make between approximately $103,000 and $154,500 per year will qualify as well. The state subsidies will be offered in addition to any federal tax credits in which an individual is eligible.
Take advantage of the current open enrollment season to research your potential health insurance options and avoid tax penalties in the future. Freeway Insurance can determine if you qualify for a health care subsidy to cover some of your health insurance costs. Give us a call at or request a free California health insurance quote online.
Plans That Do Not Count As Qualifying Coverage
Plans that only cover a handful of health services dont qualify. You may need to pay the individual mandate if you only had these products in 2018 or earlier. Common health products that dont count as qualifying coverage include
Coverage for only a specific disease or condition
Again, anyone can use these plans and products, but they do not count as qualifying health coverage on their own. You still need to have a health plan that covers other medical benefits.
Why Have An Individual Mandate
These states have an individual mandate for the same reason the ACA originally did. Without an individual mandate, people would only buy insurance if they knew they were going to need it. Most often, this means the elderly and people with pre-existing conditions.
But those who use their health insurance the most are also the most expensive to insure. Before the Affordable Care Act, insurance companies would evaluate all applicants before enrolling them. Based on peoples age and medical history, the insurance companies would then deny them health care coverage, or charge them more for it. But the ACA made that kind of discrimination illegal. And then it took things one step further. An individual mandate is an incentive for everyone to get health insurance, even healthy people. That meant there was now a larger pool of people applying for health insurance. And with more healthy people getting health insurance, health insurance companies could lower premiums for everyone.
In other words, the individual mandate was meant to be one of the of cost-savings and consumer protections we associate with the ACA. It allows more people to be insured at a lesser rate per person. Even though there is no national individual mandate anymore, some states have passed their own mandates to help keep more people insured at lower costs per person. If the mandates help more people get insured, taxpayers in these states will have lower monthly premiums on average.
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Enroll In A Qualified Health Plan
Enrolling in a qualified health insurance plan is the best way to avoid penalties at tax time. Individuals have the option to purchase short-term health insurance or to sign up for a policy if they have a qualifying life event. Penalties will be reduced for each month that a person has insurance as they are calculated on a month-to-month basis. The more months that a person goes without health insurance, the higher the penalty.
Individuals who have health insurance should start preparing now for the 2021 tax season by gathering their health insurance coverage documents, such as Forms 1095-A, 1095-B, or 1095-C, which should arrive in the mail. Employees who receive healthcare coverage from their employer should receive a statement that indicates that they were covered for part of the year or the whole year.
What Is An Insurance Penalty
In 2014, a mandate was implemented in the United States for individuals and employers to have health insurance as part of Obamacare. Most individuals who were legal residents or U.S. citizens were required to purchase qualifying health insurance or else they would need to pay a tax penalty. While this tax penalty has been rescinded at the federal level, some states are now implementing their own penalties for individuals without health insurance.
Many individuals already have qualified health insurance coverage through an employer or a public program, such as Medi-Cal or Medicare. Those without health insurance coverage from a public program or their employer will need to purchase their own insurance from a private insurance company or a federal- or state-run health benefits exchange.
Tax credits or subsidies may be available through health benefit exchanges to lower-income families. As a California resident, you should carry insurance throughout the year with no gaps in coverage of 90 days or more. Otherwise, you may face a tax penalty when you file your tax return.
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Timeline Of Obamacare Tax Penalties
The individual mandate went into effect in 2014. During that first year, penalties were relatively small. The limit was a $95 penalty per adult and $47.50 per child, with a family maximum of $285 for the year. Adults and families earning 250% of the federal poverty level or higher had higher penalties, based on a percentage of their income.
Penalties increased in 2015 and 2016, to $325 per individual and $695 per individual, respectively. Family limits increased to $975 in 2015 and $2,085 in 2016. In 2017 and 2018, the penalty amounts remained at the same level they were in 2016, which was exponentially higher than when they began.
A tax reform law instituted by the Trump administration at the beginning of 2018 removed the Obamacare penalty provisions in 2019. That law is still in effect, which is why there has not been a federal penalty for failure to have a qualified plan in 2019 or 2020. However, you are still required under federal law to have health insurance, even though the financial penalty has been waived.
What Are The Risks Of Being Uninsured
The risks of going uninsured are primarily cost related. Some of the main risks that you could face by going uninsured are:
- Steep healthcare costs Without health insurance you may get charged much more for care that would otherwise be covered by your plan.
- Difficulty paying off expensive medical bills Since you might be charged out-of-pocket full price for any healthcare you receive while not having insurance, you may find that youre quickly drowning in medical bills.
- State tax penalties While the individual mandate was repealed and no longer applies from 2019 on at the federal level, there are states with their own health insurance penalties. Check to see if your state still has a state-level individual mandate that could affect you if youre uninsured.
- Not seeking or postponing receiving healthcare According to the KFF report, three in 10 uninsured adults went without medical care they needed due to the high cost of uninsured healthcare. By hesitating to put your health first, you run the risk of health issues becoming worse over time.
- Unable to afford needed medication Because of rising prescription drug prices in the US, many prescription drugs are incredibly expensive, especially without a health insurance plan to help out. According to the KFF, uninsured adults were more than three times likely to delay or fail to purchase needed drugs due to the cost.
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Health Insurance: What To Expect When Filing Your Tax Return
Wondering whether you’ll owe a tax penalty for being uninsured? In most states, the answer is no. But if you’re in California, DC, Massachusetts, New Jersey, or Rhode Island, there is a penalty for being uninsured, which is assessed when you file your state tax return. Here’s an overview of how the individual mandate penalty has evolved over time:
Is There Still A Fine For Not Having Health Insurance
Ever since 2019 there is no government based punishment for not having medical coverage. However, there are still certain states and locales that have established their own health care coverage commands. The federal charge punishment for not being joined up with medical coverage was disposed of in 2019 due to changes made by the Trump Administration. Therefore, if you do not have health insurance and are worried about paying a fine, do not be stressed out any more. You do NOT have to pay any fine or penalty for not having health insurance in 2020.
The earlier expense punishment for not having medical coverage in 2018 was $695 for adults and $347.50 for youngsters or 2% of your yearly salary, whatever that sum turned out to be. This punishment was intended to shield the individuals from avoiding medical coverage and not having the option to take care of their clinical costs in case of injury or sickness.
There is no punishment for not having an Affordable Care Act health inclusion in 2020 except if you live in a state like New Jersey or Massachusetts where it is commanded by the state. Along these lines, momentary clinical plans will be incredibly mainstream in 2020 on the grounds that they give admittance to bigger PPO networks at lower costs than ACA Bronze plans.
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People Who Are Exempt From The Individual Mandate
There are only a few groups of people who are exempt and dont need to have qualifying health coverage:
Anyone whose religion forbids them from having any health insurance
Members of Native American tribes
Individuals and families who dont need to file a tax return because their income is too low
Anyone who would have to pay more than 8.05% of their income for insurance premiums
You may also qualify for an exemption if you suffered a personal or financial hardship over the previous year. You can learn more about getting an exemption through your marketplace. You may need to fill out and mail an application to the marketplace.
Additional Details On The Employer Mandate
Employers with 50 or more full-time and/or FTE employees must offer affordable/minimum value medical coverage to their full-time employees and their dependents up to the end of the month in which they turn age 26, or they may be subject to penalties. The amount of the penalty depends on whether or not the employer offers coverage to at least 95% of its full-time employees and their dependents.
Employers must treat all employees who average 30 hours a week as full-time employees.
Dependents include children up to age 26, excluding stepchildren and foster children. At least one medical plan option must offer coverage for children through the end of the month in which they reach age 26. Spouses are not considered dependents in the legislation, so employers are not required to offer coverage to spouses.
Assume each employer has 1,000 full-time employees who work at least 30 hours per week.
The regulations allow various calculation methods for determining full-time equivalent status. Because these calculations can be complex, employers should consult with their legal counsel.
Here are some considerations to help determine how part-time and seasonal employees equate to full-time and FTE employees.
U.S.-issued expatriate plans meet the employer mandate.
Effective July 16, 2014, the employer mandate no longer applies to insured plans issued in the U.S. territories . A territory may enact a comparable provision under its own law.
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States Where There Is Still A Penalty
In 2020, there’s a penalty for being uninsured if you’re in California, DC, Massachusetts, New Jersey, or Rhode Island. The penalty was assessed on 2019 tax returns in DC, Massachusetts, and New Jersey it will start to be assessed on 2020 tax returns in California and Rhode Island. Massachusetts has had an individual mandate penalty since 2006, although they didn’t double penalize people who were uninsured between 2014 and 2018 and subject to the federal penalty. But they started assessing penalties again as of 2019, since there is no longer a federal penalty.
Vermont implemented an individual mandate as of 2020, requiring state residents to maintain coverage. But lawmakers designed the program so that there is currently no penalty for non-compliance with the mandate. Instead, the information people report on their state tax return will be used for the state to conduct targeted outreach to help people obtain coverage and understand what financial assistance might be available to offset the cost.
How Do I Enroll In A Health Insurance Plan During Open Enrollment
You can enroll in a health insurance plan online, over the phone, or in person. To enroll, you will need the following information:
- Name, address, email address, social security number, birthday, and proof of citizenship status
- Household size and income if you want to apply for subsidies
- Coverage details and premium for an employer-sponsored plan thatÃ¢â¬â¢s available to anyone in your household
- Payment information for your premiums
- Your doctorsÃ¢â¬â¢ names and zip codes so that you can check to make sure theyÃ¢â¬â¢re in-network
- A list of medications taken by anyone who will be covered under the policy
- If you want to enroll in a catastrophic plan and are 30 or older, youÃ¢â¬â¢ll need a hardship exemption.
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If You Had No Health Coverage
Unlike in past tax years, if you didnt have coverage during 2021, the fee no longer applies. This means you dont need an exemption in order to avoid the penalty.
Important: Some states have their own individual health insurance mandate
If you live in a state that requires you to have health coverage and you dont have coverage , youll be charged a fee when you file your 2021 state taxes. Check with your state or tax preparer.
You will NOT get Form 1095-A unless you or someone in your household had Marketplace coverage for all or part of 2021.
If I Dont Qualify For An Exemption How Do I Avoid The Penalty For No Health Insurance 2020
The best way to avoid the health insurance penalty is to obtain coverage as soon as possible during the open enrollment period, which began on October 15, 2019 and will continue through January 15, 2020.
If you already have a plan, the open enrollment period is still a good time to review your current policy and compare coverage options in case you discover an option that better suits your needs.
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State Individual Mandate Penalties
With the elimination of the federal individual mandate penalty, some states have implemented their own mandates and penalties:
- Massachusetts already had a mandate and penalty, which has been in place since 2006. The state had not been assessing the penalty on people for whom the federal penalty applied, but started assessing the penalty again as of 2019.
- New Jersey implemented an individual mandate and an associated penalty starting in 2019.
- The District of Columbia also implemented an individual mandate and associated penalty as of 2019.
- Rhode Island created an individual mandate and associated penalty as of 2020.
- California created an individual mandate and associated penalty as of 2020.
Most of the states with individual mandates have modeled their penalties on the federal penalty that was used in 2018, which is $695 per uninsured adult , up to $2,085 per family, or 2.5% of household income above the tax filing threshold, although there are some state-to-state variations.
Vermont has an individual mandate as of 2020, but the state has not yet created any sort of penalty for non-compliance.
Maryland has created a program under which the state tax return asks about health insurance coverage, but instead of penalizing uninsured residents, the state is using the data in an effort to get these individuals enrolled in health coverage. Other states have since followed Maryland’s lead in creating an “easy enrollment” program.
Contact The Experts At New City Insurance
Tax penalties can come as a surprise for people who are not familiar with the 2020 changes to California health insurance coverage. To learn more about the tax penalty for not having health insurance in California or to request a consultation with an insurance professional, contact New City Insurance.
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Is There A Penalty For Not Having Minimum Essential Coverage
There is no longer any federal penalty for not having a healthcare plan that meets the standards for minimum essential coverage. The provision still technically exists in the ACA, but the IRS tax penalty was eliminated for the 2018 tax year and beyond due to the Tax Cuts and Jobs Act of 2017.
Despite there being no federal enforcement of the individual mandate, certain states have taken it upon themselves to implement individual mandates of their own for a variety of reasons. If you reside in one of the states listed below, you may still face a penalty if you dont have a plan that meets your states criteria for minimum essential coverage.
What Qualifies As Minimum Essential Coverage
“Insurance plans that qualify under provisions of the ACA must include coverage of a minimum of 10 categories,” says Mac Schneider, retired certified public accountant. This amounts to comprehensive coverage for most health insurance needs, improving access to health care services and preventing financial hardship often caused by illness or hospitalization.Health plans sold to individuals and small groups must cover:
- Ambulatory patient services
- Mental health and substance use disorder services
- Prescription drugs
- Pediatric care, including vision and dental services
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