One of the biggest changes that comes with Obamacare (Affordable Care Act), is the requirement to have health insurance. However, not just any health insurance plan will do- the Affordable Care Act dictates what types of plans meet the requirement. Under the law, such plans are referred to as minimum essential coverage.
Having health insurance is a requirement, so you might be wondering what happens if you fail to meet that requirement. The answer is that you pay a pretty steep tax penalty at the end of the year for failing to hold minimum essential coverage.
We’ll get into that in a minute, but first, let’s look at what Obamacare considers to be minimum essential coverage.
Plans That Will Protect You From the Tax Penalty
Healthcare.gov provides this list of health plans that by law are considered minimum essential coverage, which will in turn not require you to pay the tax fine at the end of the year:3
- A Marketplace plan or individual insurance plan you already have
- Any job-based coverage- including COBRA and retiree plans
- Government-offered coverage
- Medicare Part A or Part C
- Most Medicaid coverage
- The Children’s Health Insurance Program (CHIP)
- Many individual health plans bought outside of the Marketplace, including grandfathered plans (make sure you verify, though, because not all plans outside of the Marketplace qualify as minimum essential coverage)
- Coverage under a parents’ plan if you are under age 26
- Student health coverage through a university (plan or policy years that started on or prior to December 31, 2014
- Refugee Medical Assistance
- Certain health coverage for veterans through the Department of Veteran Affairs
- Peace Corps volunteer health coverage
- Most TRICARE plans
- Department of Defense Nonappropriated Fund Health Benefits Program
- State high-risk pools (plan or policy years that started on or prior to December 31, 2014)
Plans That Will Not Protect You From the Tax Penalty
Although there are many plans that are considered minimum essential coverage, there are also many that are not. We’ll identify some common types of health coverage that do not count as minimum essential coverage so that you’ll have a better understanding of what may result in a fine at the end of the year:3
- Short-term insurance plans
- Workers’ compensation
- Coverage that is only for a specific disease or condition
- Discount programs- plans that only offer discounts and not full coverage
- Coverage for only vision or dental services
How Much Are We Talking?
Now, if your health coverage is not one of the plans that are considered minimum essential coverage, you will likely be subject to paying a tax penalty at the end of the year when you file your federal income tax return. Below is cost of the fee for 2015 and 2016, according to healthcare.gov4… brace yourself:
Is There Any Way to Escape the Penalty?
The only way out of paying the tax penalty is qualifying for an exemption. Some exemptions include income and health coverage-related situations. To find the full list of possible exemptions, visit healthcare.gov, and from there follow the links to obtain the proper forms to see if you qualify for an exemption.1
- Fees & exemptions overview. (n.d.). Retrieved October 6, 2015 from HealthCare.gov website https://www.healthcare.gov/fees-exemptions/fees-exemptions-overview/
- Mangan, D. (20 July, 2015). IRS: More paid Obamacare fine than expected. Retrieved from https://www.cnbc.com/2015/07/20/irs-more-paid-obamacare-fine-than-expected.html
- Plan types that count as coverage. (n.d.) Retrieved October 6, 2015 from HealthCare.gov website https://www.healthcare.gov/fees-exemptions/plans-that-count-as-coverage/
- The fee you pay if you don’t have health coverage. (n.d.). Retrieved October 6, 2015 from HealthCare.gov website https://www.healthcare.gov/fees-exemptions/fee-for-not-being-covered/