One of the most controversial parts of the Affordable Care Act (commonly referred to as Obamacare) is the “individual mandate” — the requirement that every person have compliant health insurance coverage.
There are penalties for not having qualified coverage — many people learn about these the hard way when they completed their tax return. So here’s what you need to know:
The Obamacare penalties got significantly higher beginning in 2016.
If you don’t have health insurance in 2016, you’ll pay the higher of these two amounts:
- 2.5% of your yearly household income (Only the amount of income above the tax filing threshold, about $10,150 for an individual in 2014, is used to calculate the penalty.) The maximum penalty is the national average premium for a Bronze plan.
- $695 per person ($347.50 per child under 18) The maximum penalty per family using this method is $2,085.
Ouch.
Compare that to the penalty the last two years:
- 2014: $95 for an individual adult, with a family maximum of $285; or 1% of household income.
- 2015: $325 for an individual, with a family maximum of $975, or 2% of household income.
As you can see, the penalty has more than doubled this year.
How to Avoid the Obamacare Penalty
There aren’t really many ways to get out of the penalty. Here are a few of your options:
- Get coverage through an employer. You don’t have to get individual coverage if you’re covered on a compliant group plan.
- Go to prison.
- Buy an ACA-compliant health insurance plan.
- Participate in a recognized faith-based health-sharing ministry.
(There are a couple of hardship exceptions, listed here.)
Let’s explore option 3.
Here’s a common misconception: You don’t have to buy a compliant plan through the government-run Marketplace (healthcare .gov). The plans available on the Marketplace are available without involving the Marketplace, and their are plans that are only available off the Marketplace.
You only need to go through the Marketplace if you want to receive a “premium tax credit” (a subsidy that lowers the monthly price for those who qualify based on income and household size). A lot of people do qualify for assistance, so it may be worth checking.