Is It Illegal To Go Without Health Insurance?
Are there legal ramifications if you do not have health insurance? Since the passing of the Affordable Care Act (ACA) in 2010, which has also been referred to as Obamacare, many Americans have asked this question. The laws surrounding health insurance have changed over the fourteen years since the ACA was first passed. Here, we’ll review the original ACA guidelines and the most current federal and state legislation around health care.
The Individual Mandate Under ACA
While the Affordable Care Act was initially passed in 2010, the individual mandate (officially known as the individual shared responsibility provision of the ACA) did not go into effect until 2014. Under the individual mandate, all eligible American citizens and permanent residents were required to maintain basic health insurance coverage. Those without the minimum essential coverage (aka MEC) that was required under this provision would face a hefty tax penalty unless they are eligible for exemption. The federal penalties for not having the minimum essential coverage were either a lump sum or a percentage of total household income, depending on which of the two was the larger sum. (Note - The fines could not be higher than the average cost of bronze plans offered in the ACA marketplace at the time.) The penalty amounts looked like this:
Individual mandate controversy
Along with the expansion of Medicaid and protections for those with pre-existing conditions, the goal of the individual mandate was to help expand health coverage to all Americans. Those who were fans of the individual mandate argued that the threat of a tax penalty would lead more people to become insured and that by having a larger pool of younger and healthier people covered by insurance, costs would naturally go down for everyone. Those who opposed the individual mandate made the argument that the choice to buy health insurance should be a personal decision.
Changes to the Individual Mandate
Any individual who did not have the required minimum coverage from 2014 through 2018 would have been subject to penalties unless they qualified for a health coverage exemption. In 2017, under the Tax Cuts and Jobs Act, Congress changed the individual shared responsibility penalties for not having insurance, bringing them to zero, effectively rendering the individual mandate null and void. This change became effective after December 31, 2018. Beginning in 2019, tax penalties for the uninsured ceased to be a factor. Though technically, individuals are still required to have health insurance. They will no longer be subject to fines at the federal level if they remain uninsured.
The individual mandate still applies in several states, though not all of them carry a financial penalty for uninsured individuals. We’ll get into what it looks like at the state level later.
Affordable Care Act (ACA) Exemptions
As outlined on the IRS website, any qualified exemptions to the individual mandate would have needed to be granted by the ACA marketplace in advance and then reported on the appropriate tax returns. Exemptions may have been available for members of certain religious sects, as well as for individuals or families facing extreme financial hardship.
Religious conscience exemption
Members of select religious sects that have been in existence since at least December 31, 1950, and which have been recognized by the SSA as being conscientiously opposed to accepting any insurance benefits, including health insurance, Social Security, and Medicare, may have been granted exemption to the individual mandate by the Marketplace.
Financial hardship
In some cases, the Marketplace may have determined that certain individuals or households did not have access to affordable healthcare coverage based on their current or projected household income.
Medicaid ineligibility
In cases where someone was determined to be ineligible to receive Medicaid because the state in which they resided did not participate in Medicaid expansion under the ACA, these individuals may have been granted an exemption.
State-Specific Requirements
According to this report by the USC-Brookings Schaeffer Initiative for Health Policy, some states still subscribe to the idea that mandated health insurance helps reduce the cost of insurance for everyone by adding more young and healthy individuals to the pool of people purchasing insurance. As such, after Congress did away with the individual mandate provision, some states responded by enacting their own versions of the mandate. Those states were California, Massachusetts, New Jersey, Rhode Island, Vermont, and Washington, D.C. Each of these states has different guidelines when it comes to coverage expectations, exemptions, and penalties. All but Vermont enforces a penalty for the uninsured. Here is a more in-depth look at what the requirements are in the states that have their own insurance mandates.
California
California’s mandate began in January of 2020. The guidelines for the minimum essential insurance coverage required to avoid penalties look similar to those that the federal government outlined under the ACA. California residents who do not meet the minimum requirements for coverage are subject to individual penalties, which can fluctuate from year to year but may reach up to as much as $850 for adults and $425 for dependents under the age of 18. Low-income residents are eligible to receive subsidies to help offset the costs of insurance premiums. Californians are also able to seek exemptions for myriad reasons. You can visit the Covered California website to look into coverage options or learn about exemption opportunities. Check out the Individual Shared Responsibility Penalty Estimator to find an estimate of potential fines owed for a specific tax year.
Massachusetts
The healthcare mandate in Massachusetts went into effect in 2006, prior to the Affordable Care Act. It served as a model for the ACA. The penalties for lack of coverage in Massachusetts only apply to adults. Anyone under the age of 18 is not subject to penalties. Other factors that influence whether or not uninsured residents of Massachusetts are subject to penalties are qualified exemptions, financial hardships, and income in relation to the federal poverty level. Those who earn less than 150% of the FPL are not subject to penalties. For individuals who make more than 150% of the FPL, penalties are assessed on a sliding scale based on the level of earned income.
New Jersey
The individual mandate in New Jersey went into effect in 2019. Following the ACA’s model, there are penalties for remaining uninsured. Those penalties are based on household income, as well as how long individuals have gone without the minimum essential coverage required under state law. Fines may range anywhere between $695 and $3500 for individuals. Uninsured families may expect to pay even more, depending on how many family members there are. Penalties should not be in excess of the average cost of the state’s bronze plan. Exemptions are available in New Jersey, and factors like economic hardship, short gaps in coverage, and a lack of affordable healthcare options are taken into consideration. Additionally, any revenue collected from penalties in New Jersey is apportioned to a reinsurance fund that provides payments to insurers with the intention of lowering overall healthcare expenses.
Rhode Island
The Rhode Island individual mandate went into effect in January 2020. As with other states, exemptions are available. Those who face penalties for remaining uninsured are subject to the following penalty guidelines:
$695 per uninsured adult
$347.50 per uninsured dependent minor or,
2.5% of total household income
The penalty assessed will be the larger sum of the options listed above. Like New Jersey, Rhode Island also has a reinsurance program that allocates money collected from penalties back to insurance companies with the goal of lowering costs for everyone.
Vermont
Of the states with individual insurance mandates, Vermont is the only one that does not carry a penalty for uninsured residents. Those over the age of 18 are required to report their insurance plans on state tax returns, but there are no consequences for not having insurance.
Washington, D.C.
In the District of Columbia, as of 2019, residents are required to have qualifying health insurance under what is officially known as the Washington D.C. Individual Taxpayer Health Insurance Responsibility Requirement. Residents facing penalties for being uninsured will be subject to pay the greater amount of the following:
As much as $695 per adult
As much as $347.50 per dependent minor or,
2.5% of household income over the federal tax filing threshold
In households with more than one uninsured individual, penalty caps are set at $3,258 per person.
Alternative Health Coverage Options
While the federal government no longer mandates insurance requirements, and not all states do either, it is definitely a good idea to have some kind of health care coverage. Even the healthiest and most active individuals undergo health concerns from time to time. You never know when serious health issues or unexpected injuries may find you struggling to pay for quality care. Preventive care, annual screenings, routine check-ups, medications, and vaccines are also important for staying ahead of the curve when it comes to long-term health maintenance. Not paying for insurance may seem like it’s cheaper in the short term, but in the long term, not having health insurance can cost you so much more. If you feel you can’t afford a traditional health insurance plan, however, there are other options available to explore.
Medicaid
Enrolling in Medicaid is an excellent option for qualified individuals. This state and federally-funded insurance program helps low-income individuals of all ages gain access to free or low-cost health coverage. What is covered through Medicaid will vary from state to state. One recent change that affects those who use Medicaid is that in 2020, new rules were introduced to Medicaid in regard to coverage for drugs and therapies used for treating opioid disorders, with the goal of ensuring that Medicaid users with opioid addictions would be able to find affordable treatment.
Short-term coverage
Some insurance companies offer short-term coverage plans. You can contact the company directly, research online, or go through an insurance broker to get an idea of what kind of short-term coverage may be available in your area. With short-term coverage, you may not meet the essential benefit requirements of some state mandates, but you will still have basic coverage, and there are other benefits. Typically, premiums and deductibles will be lower. It may not matter if or when you are seeing providers that are in or out of the network, and there is no enrollment period. On the flip side, pre-existing conditions are typically not covered by short-term insurance plans. Pregnancies and mental health treatment may also be excluded from this kind of coverage. Be sure to ask what’s covered in your short-term plan.
Get a health discount card
With a health discount card, you’ll get discounted rates from participating healthcare providers, such as hospitals, doctors, dentists, chiropractors, and other specialists. You may also get discounts on certain prescription drugs. These cards may require an annual or monthly fee. The fees are typically not high, and some cards do not require a fee at all. It is important to note that having one of these cards is not the same thing as having health insurance. They are intended for people who pay for all of their healthcare out of pocket. The discounts provided by these cards will vary but may be as high as 85%. One obvious drawback of the Health Discount Card is that it is limited to only those healthcare providers who accept it, and there is no guarantee that the providers you prefer are on that list.
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