The Affordable Care Act, commonly known as "Obamacare," has an individual mandate that requires the vast majority of the US population, both citizens and temporary residents, to buy health insurance to protect them in the event of an emergency or accident. The mandate will be repealed in 2019, but will remain in effect for the rest of this year.
Buying health coverage from an insurance company is mandatory until the individual mandate is repealed in 2019. It is usually done during Open Enrollment Periods, which typically occur at the end of each year and are sometimes extended to the first few weeks of the next year.
Even so, some people might not be able to buy health coverage during this standard period, or their purchasing circumstances might change drastically during their coverage. In these situations, a Special Enrollment Period may be requested. There are several qualifying circumstances and events that can qualify you for a special enrollment period to access coverage outside of the standard times.
If, despite all of the above, a person decides not to follow the individual mandate and does not buy any type of health coverage, they will be fined. This fine is called a penalty, and consists of an amount that must be paid in addition to having to buy health coverage.
Fines are calculated in two ways. On the one hand, there could be penalties per person per year. On the other, the fine could be a percentage of that person's individual or family income, depending on the amount they earn.
In 2018, the fines per person per year were as follows:
Adults without coverage: $695 per year.
Minors without coverage: $347.50 per year.
These annual fines cannot exceed $2,085 per year for a single family.
Fines that are calculated based on the person's individual or family income will be 2.5% of what they earn throughout this year. In any case, this percentage penalty may not exceed the cost of a bronze health plan. This type of plan costs $3,625 for individuals and $16,320 for a family of five or more.
How Are Fines Paid, and Who Is Exempt From Paying?
Fines are prorated to the number of months in that year that you did not have minimum essential coverage. The fine is then applied based on this number. Only people who have not had insurance for over 3 months are fined. As long as you had coverage on a single day in a month, you are considered to be covered for that month and it won't count toward the penalty. In general, penalties are paid when you file your tax return for the year in which there were periods without insurance.
If you do not pay the fines, the IRS will place a hold on future tax refunds until the debt is paid. However, there are no criminal consequences for anyone who doesn't pay.
What's more, there are many cases in which you don't have to pay the fine for not having the required insurance. They are:
- The lowest-priced minimum coverage costs more than 8.13% of your household income. This means that your income is too low and you cannot afford mandatory insurance.
- You had less than three months without coverage.
- Your income is low enough that you are exempt from paying taxes.
- You are Native American or are insured by an Indian Health Services provider.
- Your religion has a conscientious objection to insurance.
- You are incarcerated.
- You are a member of a healthcare sharing ministry.
- You have been living outside of the United States for at least one year.
- You qualify for an exemption for being homeless, bankrupt, evicted or other similar cases.
Who Isn't Required to Buy Insurance?
Though the Affordable Care Act aims to universalize health coverage in the United States through private insurance, there are people who are exempt from buying it. People and groups are exempt if:
- Their income is under the amount required for filing a tax return.
- The lowest-priced minimum coverage costs more than 8.13% of their household income.
- They typically live outside the United States (minimum of 330 days per year out of the country).
- They are incarcerated.
- They are members of a religious sect that prohibits paying for health insurance.
- They are a member of a healthcare sharing ministry.
- They are a member of a Native American tribe.
- They could qualify for Medicaid but live in a state that did not expand its Medicaid program, and so cannot use it.
- They are experiencing a temporary situation of hardship, such as homelessness, bankruptcy, eviction, domestic violence, national disaster, or even having recently lost a family member.
- Undocumented immigrants.
If none of these circumstances apply, both citizens and residents are required to buy private insurance that will guarantee payment of potential medical expenses. If not, they will be faced with the fines and penalties we've mentioned.
