How Can I Avoid an Obamacare Tax Penalty in 2019?

Affordable Care Act

How Can I Avoid an Obamacare Tax Penalty in 2019?

Updated on November 12, 2019

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Tax penalty repeal

How Can I Avoid an Obamacare Tax Penalty in 2019?

In the past if you went without Obamacare-compliant health insurance for more than two consecutive months during the year, you were sometimes subjected to a significant tax penalty. According to healthcare.gov, the penalty for 2018 (paid when you filed 2018’s taxes in 2019) was $695 per adult or 2.5% of your taxable income – whichever was greater!
Since the Affordable Care Act (the “ACA” or “Obamacare”) became law, a lot of people have learned about the uninsured tax penalty the hard way – by paying it.
Now that the individual mandate has been repealed there is no federal tax penalty for forgoing coverage from 2019 on. While there is no tax penalty at the federal level, some states have penalties of their own.

State-level health insurance penalties

It is still important to look at your state’s requirements for health insurance. There are a handful of states that have their own health insurance penalties for those who go without state-law compliant coverage.
According to iHealthAgents some places that have health insurance penalties are:

  • Massachusetts: Their health insurance penalty was implemented in 2006. In the past, if a penalty was paid at the federal level they did not charge one at the state level.
    However, they will start charging the state fee now that the federal penalty was repealed.
  • New Jersey: In 2019, the state of New Jersey will enforce a health insurance penalty.
  • Vermont: In 2020, Vermont’s health insurance penalty will go into effect.
  • District of Columbia: In 2019, the D.C.’s health insurance penalty will go into effect.

If there is no Obamacare fine, do I still need health insurance?

While the health insurance penalty is no longer in effect from 2019 on, your wallet can still be hit hard by uninsured and unexpected medical expenses. It’s still important to get coverage to protect your finances even though there is no fine.
eHealth offers a wide range of Obamacare-compliant plans to protect your health and your wallet from expensive or unexpected medical costs, as well as alternative options for those who require less benefits to be covered. While eHealth is a private online marketplace, you can still qualify for federal assistance to help pay your monthly insurance premium.
Generally, if you make up to 400% of the federal poverty line (FPL) – which is $12,490 for an individual, and $25,750 for a family of four in 2019 – you should qualify for some government assistance in paying for your health insurance.
If you are looking for insurance outside of the open-enrollment-period or a special-enrollment period, you may qualify for short-term health insurance which will provide some protection during a lapse in health insurance coverage. However, if you are in a state with a state-level tax penalty short-term health insurance may not protect you from being fined.

ACA-compliant insurance

You have a few options when it comes to health insurance that is compliant with Obamacare. This health insurance will help cover your healthcare needs and keep you from getting charged a tax penalty at the state level.Individually purchased health insurance – Whether you buy it through a licensed agent, a government-run exchange, directly from the insurance company, or a private online marketplace (like eHealth), Obamacare-compliant major medical individual and family health insurance plans should protect you against any state-level penalties. All major medical health insurance plans (that is, all traditional health insurance plans) are now Obamacare-compliant and will provide you with the coverage required under the law.

Health insurance bought with government subsidies – Under Obamacare, people with a taxable income of up to 400% of the federal poverty level may qualify for government subsidies when they purchase health insurance. With subsidies, you’re still getting Obamacare-compliant major medical health insurance – but you’re also getting help paying for it.

Employer-based health insurance – Most employer-based health insurance plans are major medical health insurance plans and should also protect you from any state-level tax penalties.

Medicare or Medicaid – If you’re enrolled in Medicare or Medicaid, you should not need to worry about state tax penalties for going uninsured. Medicare and Medicaid provide you with coverage that’s compliant with Obamacare.

Other government-sponsored health insurance – If you are covered under U.S. military health insurance or CHIP or other government health insurance programs, you should not need to worry about any state-level penalties.

Non ACA-Compliant Insurance

Not all forms of insurance are ACA-compliant or are even health insurance, for that matter. Here are a few forms of insurance that aren’t ACA-compliant and may not protect you from a state-level health insurance penalty.

  • Short term health insurance– Short term health insurance plans do just what the name suggests – they provide you with a measure of protection against unexpected medical costs for a limited period of time. Some people find short term plans attractive because they tend to cost less than a major medical health insurance plan and you can enroll in a short term plan year-round (something not true of Obamacare-compliant plans; see below).
    However, short term health insurance plans do not comply with the minimum essential coverage requirements of Obamacare. They generally do not provide you with coverage for things like preventive care, pre-existing medical conditions, or maternity care
    Short term plans can be particularly valuable if you’re between the coverage periods for different major medical health plans – but short term plans do not meet your coverage requirements under the law. They may not protect you from state-level health insurance penalties.
  • Accident or critical illness insurance– These are not traditional health insurance plans. Instead, these are insurance plans that pay you a defined amount of money in case of a specific injury or qualifying medical diagnosis.
    They do not provide the minimum essential coverage required by Obamacare, and they should not be considered as a substitute for health insurance.
    Accident and critical illness insurance plans can be a valuable addition to a major medical health insurance plan, but they are not health insurance and will not protect you from state-level fines.
  • Life insurance– Some people imagine that a life insurance policy is all they need under Obamacare. In fact, life insurance plans are not health insurance plans and do not meet the coverage requirements of the Affordable Care Act.
    A life insurance policy is not health insurance.
  • Dental and vision insurance– Dental and vision insurance can be great to have. On their own, however, they will not cover medical care outside of dental and vision-related costs.

A note about Obamacare’s open enrollment period

As mentioned above, you may not be able to purchase Obamacare-compliant health insurance coverage at just any time of year. Generally speaking, you’ll need to enroll in coverage during the annual open enrollment period, or when you have a qualifying life event.
The Obamacare open enrollment period for 2020 health insurance plans is scheduled to begin on November 1, 2019 and continue through December 15, 2019. Generally speaking, your coverage under any new plan selected during this open enrollment can begin no sooner than January 1, 2020.
Outside of open enrollment, you may trigger a special enrollment period for yourself when you experience a qualifying life event. These events include marriage, divorce, the birth or adoption of a child, a permanent move to a new coverage area, or the loss of qualifying coverage, etc.
When you experience a qualifying life event, you generally have 60 days to enroll in a new Obamacare-compliant health insurance plan. You typically need to provide proof of the qualifying event and otherwise meet the specific conditions that apply to your qualifying life event.

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