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Ask Frank: Uninsured Between Jobs — Will I Owe a Tax Penalty?

Ask Frank: Uninsured Between Jobs — Will I Owe a Tax Penalty?

Posted May 24, 2017 by Jenifer Dorsey


Dear Frank,

I just recently lost my health insurance coverage due to a job change. I will have insurance through my new job starting in August, but I will be going without coverage for about 75 days. If I choose not to get temporary insurance, will I be penalized on my taxes?

Thank you,

Between Plans


Hi Between Plans,

Under the current law, you are exempt from owing a tax penalty if you experience a single gap in coverage that is less than three consecutive months.[1] Given the length of time you expect to be uninsured, you should not owe a fine at tax time. Of course, if you have been or will be uninsured at another point in 2017, you could wind up owing the tax penalty (i.e., the individual shared responsibility payment).

While temporary insurance such as short-term medical (STM) may not be considered minimum essential coverage under the Affordable Care Act, it can provide benefits to help pay for unexpected medical expenses while you are between major medical plans. That is a key reason people choose STM while in between jobs, in employer waiting periods, etc.


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STM policies last anywhere from 30 to 90 days. If you were to go without major medical insurance for more than 90 days and kept re-enrolling in new STM policies instead, you could still owe a tax penalty. 

A hospital indemnity plan would be another option for the interim. These plans, much like STM, typically cost a fraction of major medical premiums and provide benefits for hospitalization, surgery and critical illnesses. Unlike STM, they can be maintained after you secure major medical insurance on your own or through your new employer. The two plans will not coordinate, but the hospital indemnity plan can help with out-of-pocket costs if you have a covered expense. 

If you have additional questions specific to your situation or would like to learn more about temporary or long-term benefits, we recommend talking with a licensed health insurance producer. You can call the number at the top of your screen to speak with a producer or click on the link below to find an agent in your area.


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Best wishes in your new job!




Legal Disclaimers

[1] Internal Revenue Service. “The Individual Shared Responsibility Payment – An Overview.” IRS Health Care Tax Tip 2014-04, March 20, 2014. Accessed May 19, 2017. https://www.irs.gov/affordable-care-act/the-individual-shared-responsibility-payment-an-overview