What does the new tax law mean for your health care?
Updated February 5, 2019.
Why should you still buy health insurance, even though there is no tax penalty for 2019?
In short, last year, one-in-three people had an unexpected injury or illness that cost them more than $2,700 in medical costs, on average (see report). In as little as 24 hours, you may qualify for a short-term health plan that provides limited coverage for less than $100 a month.
The New Tax Law & Health Insurance Taxes
When Republicans passed the overhaul of the tax code, on December 20, 2017, the critical change for people who buy their own health insurance is that the new tax law scrapped a central part of the Affordable Care Act (Obamacare) by effectively repealing the individual mandate. While the penalty for being uninsured remains in the tax code, it was reduced to $0 and goes into effect in 2019.
On December 14, 2018 the case of Texas v. United States invalidated the ACA, because of this change to the mandate. However, the court ruling does not affect anyone’s ability to sign up for ACA health insurance plans for 2019. eHealth.com is open every day, and enrolling people into ACA plans.
QUESTION: What does the new tax law mean for your health care?
The new tax reform bill does not repeal Obamacare (the Affordable Care Act), but starting in 2019, it does effectively eliminate Obamacare’s individual mandate, which requires people to pay a tax penalty if they don’t buy health insurance.
The individual mandate still applies for 2018. If you were uninsured in 2018, you may be on the hook for a tax penalty in the amount of 2.5 percent of your yearly household income or $695, whichever is greater.
In 2019 and beyond, the penalty is 0 percent of your yearly household income
QUESTION: If there’s no penalty for going without coverage, can I cancel my plan now and sign up later if I get sick?
Most people can only buy a major medical health insurance plan for themselves or their families during the annual open enrollment period.
If you miss open enrollment, you typically have to wait until the following year to buy a plan.
If you have a qualifying life event – like the loss of a job or a move to a new city – that creates a special enrollment period when you can sign up for coverage outside Obamacare’s annual open enrollment season.
QUESTION: What are my options if I can’t afford a major medical / Obamacare plan?
Major medical health insurance plans that meet Obamacare’s requirements are generally the best option.
But if you’re struggling to afford a major medical health plan, here are some alternatives to consider:
- Short-term medical – These plans are available for up to twelve months at a time and provide limited coverage for new health problems that occur during that period. Plans are not guaranteed to be renewed. And unlike losing a major medical health insurance policy during the year, losing your short-term coverage does not make you eligible to sign up for a health plan under Obamacare outside of the annual open enrollment period.
- Medical insurance packages – These multi-policy products combine different types of supplemental insurance into a single package of benefits. In most cases there is no limit on the amount of time you can keep a plan.
QUESTION: Can I get short-term coverage or medical insurance packages if I have a pre-existing medical condition?
Typically, no. Most short-term plans, and some of the medical insurance packages we offer at eHealth are medically underwritten, which means you can be declined based on your medical history.
Some plans will cover people with pre-existing conditions, but will typically only cover the cost of services for new medical problems that develop once you’re on the plan.
Medical care for any conditions you had before signing on to the plan are generally not covered.
QUESTION: Will my prices go up now that the mandate is gone?
If you signed up for coverage during open enrollment, your prices won’t change for the next twelve months. Beyond 2018, it’s not clear what effect the repeal of the individual mandate will have on health insurance prices.
Many independent analyses suggest that repealing the individual mandate is likely to cause health insurance premiums to rise higher than they would otherwise if the mandate remained in place.
However, others argue that stronger enforcement of the open enrollment period and special enrollment periods could do enough to stabilize prices.
If you qualify for tax credits to help lower the cost of insurance you may be shielded from any increases. However, consumers who pay the full cost of health insurance on their own are likely to find already expensive premiums even pricier.
QUESTION: When should I consider an alternative to major medical / Obamacare plans?
If you can afford to buy Obamacare compliant major medical coverage, you should. No other product will provide you with the same kind of comprehensive benefits.
That said, if you cannot afford Obamacare or if you’re not able to enroll outside of open enrollment, you may want to consider an alternative form of coverage if:
- You’re healthy and have no major pre-existing conditions (e.g. cancer, diabetes, heart disease).
- You don’t take expensive prescription drugs or require other expensive medical care on a regular basis.
- You’re comfortable with other limitations for non-Obamacare plans, such as maximum coverage limits for certain time periods.