March 31st marks the end of the first Obamacare enrollment period. Enrollment will open up again in November for coverage that will begin in 2015. The idea behind having these enrollment windows is to provide some measure of protection against people waiting to join until after they are sick. Although it is true that you can jump in on the next enrollment window with your pre-existing medical situation, you will be on the hook for your medical bills until your coverage goes into force. The other significant issue that comes into play as a result of the enrollment window closing are penalties.
How Obamacare Penalties Will Be Assessed
The individual mandate requires that all Americans have health insurance. Most Americans already do through their employer, a government program like Medicare or Medicaid, or privately purchased insurance. Even if you fall into the 20% not already covered by health insurance, you may be eligible for an exemption. Here is a partial list of some of the scenarios that would allow you to be exempt and not subject to a penalty (source: Healthcare.gov) -
- You’re uninsured for less than 3 months of the year
- The lowest-priced coverage available to you would cost more than 8% of your household income
- You don’t have to file a tax return because your income is too low (Learn about the filing limit.)
- You’re a member of a federally recognized tribe or 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 insurance, including Social Security and Medicare
- You’re incarcerated, and not awaiting the disposition of charges against you
- You’re not lawfully present in the U.S.
If you end up facing a penalty for 2014 it will be $95 or 1% of income, whichever is greater. Before you breathe a sigh of relief, these penalties are just for openers. Within just three years the penalty goes to $695 or 2.5% or your income, whichever is greater. So, as much as the media is making a big deal out of the March 31 deadline, the reality is that the consequences will be minimal for those not living up to the mandate this year.
How the penalty will land on your doorstep is when you file your 2014 tax return (the one due by April 15, 2015). Starting next year, you will be required to complete a form attesting to your compliance with the mandate or your exemption from it. The odd thing to note is that there is currently no system in place for the IRS to verify that you actually have insurance. I don't expect the 'honor system' to last for the long run. What is likely to happen very soon is the implementation of a proof of insurance type of form that is sent to both the taxpayer and the IRS. Similarly to how 1099's and W-2's list income, banks and brokerages report interest and capital gains, there will a verification system implemented - that you can be sure of.
Is Obamacare A Bad Deal For Everyone?
If you are a regular reader of my blog, you know that I am advocating Christian Medical Sharing for most Christians. Although I disagree with the concept of forced insurance coverage, now that we have this system in place there are many that will benefit from it. The most obvious group would be those with a pre-existing medical condition. Secondly, lower income individuals may find a large portion of their insurance premium paid by tax subsidies. In fact, a relative of mine that is college age told me this week that they are getting nearly free health insurance as a result of the large subsidy that they qualified for.
What You Can Do Now?
You can do nothing and then just pay the penalty, and a lot of people are going to do just that (at least for now). Apply for Obamacare by phone or through the website and see what options are available and at what cost. Of course, you are waiting until the last minute so expect long hold times and possible overloads at the website. If you get the ball rolling but can't get it all done prior to March 31st the government may grant you extra time. So, keep your documentation to prove you were at least trying to sign up. If you find the option of Christian Medical Sharing interesting, check out my prior articles on how it works.
Your thoughts, comments, and your own advice is always welcome in the comments section below.
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