In 2014, there is a penalty for not having health insurance. This fee is sometimes called the “individual responsibility payment,” “individual mandate,” or penalty. If someone who can afford health insurance doesn’t have coverage in 2014, they may have to pay a fee. They also may have to pay for all of their health care.
When the Uninsured Need Care
If you are uninsured and receive urgent-often expensive-medical care, but don’t pay the bill, everyone else ends up paying the price for that visit and care rendered. This is why there is a push for everyone who can afford health care to take responsbility for their own health insurance by getting coverage or paying a fee for not being covered.
If you choose to be uninsured and pay the penalty, you will also be responsible for the entire cost of all of your medical care. You won’t be protected from the kind of very high medical bills that can sometimes lead to bankruptcy.
The penalty in 2014 and beyond
The fee increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and later years it’s 2.5% of income or $695 per person. After that it is adjusted for inflation.
The penalty in 2014 is calculated one of 2 ways. You’ll pay whichever of these amounts is higher:
If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you’re uninsured. If you’re uninsured for less than 3 months, you don’t have a make a payment.
Learn more about the individual responsibility payment from the Internal Revenue Service.
Enroll by March 31, 2014 and you won’t have to make the individual shared responsibility payment
If you enroll in a health insurance plan through the Marketplace by March 31, 2014, you won’t have to make the payment for any month before your coverage began.
For example, if you enroll in a Marketplace plan on March 31 your coverage begins on May 1. If you didn’t have coverage earlier in the year, you won’t have to pay a penalty for any of the previous months of 2014.
If you pay the penalty, you’re not covered
It’s important to remember that someone who pays the penalty doesn’t have any health insurance coverage. They still will be responsible for 100% of the cost of their medical care.
After open enrollment ends on March 31, 2014, they won’t be able to get health coverage through the Marketplace until the next annual enrollment period, unless they have a qualifying life event.
Minimum essential coverage
To avoid the fee you need insurance that qualifies as minimum essential coverage. If you’re covered by any of the following in 2014, you’re considered covered and don’t have to pay a penalty:
What kinds of health insurance don’t qualify as coverage?
Health plans that don’t meet minimum essential coverage don’t qualify as coverage in 2014. If you have only these types of coverage, you may have to pay the fee. Examples include:
Exemptions from the fee
Some people with limited incomes and other situations can get exemptions from the fee. Learn about exemptions from paying the fee. Contact us about our tax planning services to help you understand this law.