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So we've talked about what to expect on the carrot side (tax credit).
What about the stick??
That's the tax penalty for not having health insurance.
It goes up each year and 2017 is no different.
Let's look at the new levels and how it's tipping the scale for many people.
Result: $1000's at tax filing time in 2018!
Let's get started.
Here's the deal...
If you do not purchase ACA compliant health insurance for the majority of 2017, you'll likely have a tax penalty due April of 2018.
The amounts increase each year but here's the current estimate:
The penalty is starting to really matter.
Let's look at an example:
If you may $40K and did not have ACA coverage, your expected penalty is now $1000!
That's a big hit.
As your income goes up, so does the tax penalty.
There's a minimum penalty for people regardless of income.
That's the $695/adult or half that amount for kids.
So that's the bad news. Let's look at some of the details about the penalty and then hopefully, a dose of good news!
Of course, there's all kinds of rules. It's Congress after all!
First, what do they mean by ACA compliant health plans?
The ACA law (Obamacare) established certain guidelines for what a compliant plan must look like.
First, it has to cover the 10 Essential Health benefits. Secondly, it has to conform to certain benefit levels.
There's even a Minimum coverage plan for people under age 30.
So what does all this mean?
Any of the Covered California plans and off-exchange plans that you quote here will qualify!
Just look for the Bronze, Silver, Gold, and Platinum names.
The network (HMO, PPO, HSA, etc) doesn't matter.
Each carrier's option will conform.
What doesn't conform to ACA compliant?
Short term health insurance plans are not ACA compliant.
There are companies that sell non-compliant association plans on the market.
They're usually very aggressive and about half the price of ACA compliant plans.
One note...they might have many other faults such as daily hospital caps and just an inability (or desire) to pay for claims.
We hear the horror stories daily.
If the pricing sounds too good and the "agent" is pushy, RUN...don't walk.
Again, all the plans you can find at calhealth.net (except for Short term) are ACA complaint.
Again, short term and questionable association plans are likely not ACA compliant. Be careful!
You'll need to request a hardship waiver from www.healthcare.gov
There are other reasons people may file full year hardship waivers which you can find more information here.
The most common waiver is affordability.
Keep in mind that if your income is under the minimum amounts here, you may qualify for low or no cost Medi-cal anyway!
That's a slam dunk versus paying the penalty!
This bring up another point...
What if you add the tax penalty AND the lost tax credit??
Look at the levels above.
If you think you might qualify for a 2017 tax credit based on income and size of household (everyone that files together on one 1040 tax form)...
The actual premium may come way down from the the baseline rate due to the tax credit.
Let's say you make $25K annually.
Your tax penalty would be over $600!
More importantly, depending on your age, you may qualify for a tax credit of $100's per month!
Now, all of a sudden, you can get the Bronze plan for a small amount.
Smaller than what the penalty would be!
And...you actually have insurance so you don't end up owing a hospital for years to come.
This really comes into play with health insurance for larger family of 4, 5, or more people.
So, let's say you did not have qualified ACA health insurance for all or part of 2017.
Types of ACA compliant plans:
If you did not have qualified coverage, then what?
There are hardship waivers you request. More information available on those here.
You may also be allowed a 3 month gap in coverage.
You still need to request the waiver for this period of time.
This means that if the total penalty is $1200, it's really $100/month.
If you have coverage for 6 months, you would be eligible for $600 in the above example.
You may also be able to get 3 months reduced from this with the gap waiver we mentioned above.
We may be able to get it down to $300.
What plans do not qualify?
Tax filing time the following year.
When you file your taxes, there's a whole section now about health insurance.
If you do not have qualified coverage or a waiver, the penalty will be either deducted from your tax refund or added to your tax payment.
Either way, it can be big wake up call since the total can be $1,000's of dollars.
There is supposed to be a penalty for people that received a tax credit but were actually eligible for Medi-cal but we haven't seen it applied yet.
Don't discount the IRS from catching up with that provision going forward!
It's a big hit and you're essentially paying for other people's tax credit.
Let us look at the combined tax credit and penalty to see if there's a better way to play it.
Our services are free to you so we're happy to help with any questions.
Again, there is absolutely no cost to you for our services. Call 800-320-6269 Today!
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20 years of experience in the California health insurance market has taught us one thing...Competent and experienced guidance is Invaluable
We can quickly (very important) size up your health insurance needs and clearly explain the options available to you. Our focus is finding the most coverage at the best cost to you.
We are licensed Covered Ca agents with in-depth knowledge of their plans, process, and tax credits.
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