“What is my penalty if I don’t buy medical coverage?” Certainly not the most asked question we receive in our insurance office. After all, our business is to help people get medical coverage for good health. We usually answer questions about doctors, hospitals and deductibles. But in the age of Healthcare Reform, tax penalties are now a consequence if you don’t follow the law regarding owning a healthcare policy. There is a penalty for each month you and your family are not covered. Here is how it works, according to the Department of Health and Human Services:
The fee for not having health coverage is a result of the “Shared Responsibility Provision” of the ACA, which requires that everyone purchase a medical plan if they are not already covered (by an employer or other program). The fee is calculated one of 2 ways. If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay either a percentage of your household income or a flat fee — whichever is higher.
The fee in 2015:
If you don’t have coverage in 2015, you’ll pay the higher of these two amounts:
• 2% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan. The IRS is charged with determining this maximum penalty. The IRS has set the maximum penalty for 2015 as $1,035 for a shared responsibility family with five or more members.
• $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.
The fee for not having coverage in 2014:
If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:
• 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan. The IRS determined that the max penalty for 2014 is $1,020 for a shared responsibility family with five or more members.
• $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
The fee after 2015:
The penalty increases every year. In 2016 it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.
How do you pay the fee?
You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. Most people will file their 2014 returns in early 2015 and their 2015 returns in early 2016.
Note: This year the Open Enrollment Period for 2015 allows consumers to purchase healthcare plans up until February 15th, 2015, and the effective dates of such plans will be March 1st, 2015. The law allows a 3 month grace period for being uninsured, but after that you will be charged a 1/12 penalty for each month you are uninsured for this year.
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