When is it the law to have health insurance?
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UPDATED: Mar 19, 2020
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- Most U.S. Citizens and non-citizen residents living in the United States must have health insurance or pay a tax penalty for not having health insurance
- Parents can keep their children on their insurance policy until children reach the age of 26
- Some exemptions are available for short gaps in coverage, tribal membership, financial hardship, and other reasons
The Patient Protection and Affordable Care Act was passed in 2010, upheld by the Supreme Court in 2012, and went into effect in 2014.
This particular legislation requires most Americans living in the United States to maintain minimum essential coverage for health insurance; however, there are a few situations where a person may not be required to maintain minimum essential health coverage because they qualify for an exemption from the law.
Additionally, people may choose to pay a tax penalty rather than maintain qualifying health insurance coverage.
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Who has to have health insurance?
The Affordable Care Act (ACA) was enacted to move the United States closer to a system of universal health care. As a result, the ACA insurance requirement applies to all U.S. Citizens and many non-citizen residents living in the United States as well as Citizens who live abroad for less than 330 days in a calendar year.
The requirement can be satisfied by maintaining minimum essential coverage, certifying an exemption applies, or paying a tax penalty for not having the minimum essential coverage during a calendar year.
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Minimum Essential Coverage
Minimum Essential Coverage is any health insurance policy that meets the requirements of the Affordable Care Act. The types of policies that satisfy the minimum essential coverage requirement can be obtained through employers, Medicare, Medicaid & CHIP, and the Health Insurance Marketplace.
Plans obtained from other sources may also qualify as minimum essential coverage if the plan has been certified by the Health Insurance Marketplace for providing essential health benefits such as preventative care, abiding by standardized cost-sharing guidelines, and meeting other requirements under the Affordable Care Act.
Cost-sharing is the out-of-pocket burden to the consumer in the form of deductibles, co-pays, and maximum out-of-pocket amounts that the consumer pays in addition to the premiums for the policy.
Exemptions from the Health Insurance Requirement
There are some situations in which a person does not have to have health insurance or will not be penalized for not having health insurance.
Some of these exemptions are claimed and reported at the time you file your tax return while other exemptions require certification prior to filing a tax return.
The categories of exemptions that can be claimed on tax returns include:
- Unaffordable coverage because premiums exceed a certain percentage of your annual income
- Short coverage gap of less than three months
- Income below the income tax filing threshold
- Citizens living abroad and some non-citizens
- Members of a health care sharing ministry
- Members of federally recognized Indian Tribes
- Incarcerated persons who are serving time following a conviction
- Aggregate self-only coverage unaffordable
- Residents of a state that didn’t participate in Medicaid expansion who makes less that 138 percent of the federal poverty level
The categories of exemptions that must be approved by the marketplace in advance of filing a tax return are:
- Members of certain religious sects that were recognized by the Social Security Administration before 1951
- General hardship which includes things such as the death of the person whose employer provided the health insurance
- Coverage considered unaffordable based on projected income
- Ineligible for Medicaid in states that refused the Medicaid expansion
- Unable to renew existing coverage
- Covered through AmeriCorps
Several of the available exemptions from the health insurance requirement mentioned above are determined based on the affordability of health insurance policies for different individuals and household.
This determination of affordability is based on whether it is possible for a person or household to get qualifying coverage for a cost that is less than a certain percentage of the individual or household’s income.
In 2015, that percentage was 8.05 percent of income. That percentage is determined by the IRS and changes from year to year to reflect changes in the economy and the insurance marketplace as the federal government’s support of state programs and exchanges is reduced.
These determinations also take into account whether the individual or household qualifies for subsidies, which help pay for insurance or tax credits; these help offset the burden of maintaining insurance by reducing other taxes owed.
In conclusion, the ACA requires nearly everybody living in the United States to prove compliance with the law by having health insurance that meets the minimum essential coverage, certifying an exemption from the coverage requirement applies to the individual or household if they are required to file a tax return, or paying the tax penalty if the individual or household did not have qualifying coverage or qualify for an exemption.
Make sure you’re in accordance with the Individual Mandate and avoid a hefty tax penalty; enter your zip below for free private health insurance quotes from your state’s top providers!