If you reference Obamacare and 2014 in the same sentence, prepare to get a plethora of comments from the group you are speaking with. This is because many additional provisions of the new Patient Protection and Affordable Health Care Act (typically referred to as “Obamacare”) go into effect in that year. Some people are happy about these provisions, while others foretell economic devastation, massive layoffs, and a Wall Street collapse.

Politics aside, it’s important for us to understand how one of these new provisions will affect us beginning January 1, 2014. This provision I am talking about is the fee, or insurance penalty tax, that will be assessed on people who do not have an acceptable health insurance plan.

2014 Health Insurance Penalty Fee

Beginning January 1, 2014, people who do not carry health insurance (and who can afford it) will be charged an annual fee. And this annual penalty fee does not give you actual health care coverage. Paying this insurance penalty fee is like getting a speeding ticket where you do not benefit at all and still have to pay something. The penalty is also referred to as the Obamacare tax or Obamacare penalty.

The reason this fee was imposed is because of the huge costs to the taxpayer when uninsured people end up in the hospital and other urgent care facilities. When people do not carry health insurance and show up at hospitals and other facilities the hospitals treat them, and then charge them amounts that are many times never paid. Someone has to pick up the tab on this, and it’s typically taxpayers. By imposing a fee on the uninsured, the government hopes to get more people onboard with health insurance plans, thus reducing the overall cost.

How Much is the Penalty for No Health Insurance?

The penalty tax for going without health insurance by year is:

  • 2014 insurance penalty fee: $95 per person.
  • 2015 insurance penalty fee: $325 per person.
  • 2016 insurance penalty fee: 2.5% of income or $695 per person or whichever is higher.
  • 2017 insurance penalty fee: Increases will be based on inflation.

What Counts and Doesn’t Count as Minimum Essential Coverage

In order to avoid the Obamacare penalty, you must have minimum essential coverage or be determined to be unable to pay the fee (more on this below). According to this law, minimum essential coverage includes the following: any Marketplace plan, or any individual insurance plan you already have, employer-sponsored plans (including COBRA, and retiree plans), Medicare, Medicaid, the Children’s Health Insurance Plan (CHIP), TRICARE, Veterans’ healthcare programs, and Peace Corp Volunteer Plans. If your plan is not one of these, call your provider and ask if the plan counts or not. Plans that cover only dental/vision, worker’s compensation, coverage for a specific disease or condition (like cancer insurance), or plans that only offer discounts for medical services do not count as minimum essential coverage.

Open Enrollment Period

Let’s say for whatever reason you have lost your health insurance coverage or never had any to begin with. If your employer does not offer a plan, then your next step is to shop around through something called The Marketplace. Think of shopping around for healthcare insurance sort of like you currently shop around for car insurance on an aggregate site where you get multiple quotes and offers at the same time. All plans offered through The Marketplace will be state-certified and approved according to the state where you reside. Also, some plans will be discounted with subsidies depending upon your income level via the New Health Insurance Premium Tax credit. To see the plans and if you are eligible, you can use the online questionnaire. The discounts will not apply if you go through that individual insurance company’s website; it will only apply by going through The Marketplace.

When Can You Sign Up?

The Marketplace has not been built yet; the goal is to launch it in the fourth quarter of 2013. Open Enrollment begins on October 1, 2013, which is when you can sign on and begin your healthcare search for plans that will begin on January 1, 2014. Update: The Deadline for Obamacare is Delayed.

How to Get Out of Paying the Obamacare Penalty Fee

Only uninsured people will need to pay the fee. If you are uninsured and any of the following applies to you, you do not have to pay the penalty for Obamacare mandate:

  • You are uninsured for less than 3 months of the year
  • It is determined that your income is very low, making coverage unaffordable (specifically if you make too little income to be required to file a tax return)
  • If you would qualify for the new income limits for Medicaid but your state has chosen to not expand Medicaid eligibility
  • If you are a member of a federally-recognized Indian tribe
  • If you participate in a healthcare sharing ministry
  • If you are a member of a recognized religious sect with objections to health insurance

Even if you do not meet one of these exceptions, you can still apply for an exemption through The Marketplace. Instructions on how to apply for an exemption will be in a future article as The Marketplace becomes available.

Do you currently have healthcare insurance? How do you feel about the insurance penalty fee?

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