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The Affordable Care Act’s individual shared responsibility provision, aka the “individual mandate,” requires most Americans to have health insurance.
Those who fail to obtain minimum essential coverage - an Obamacare plan or other major medical policy either through an employer or on the private market - may owe a tax penalty known as the individual shared responsibility payment.
There are two ways to avoid paying this penalty:
Some circumstances may make you exempt from the individual shared responsibility payment. For example, if you:
Some exemptions must be obtained through a state-based or federally facilitated health insurance exchange while others must be claimed on your federal tax return.
Qualifying for an exemption isn’t all good news...
Qualifying for an exemption shields you from the tax penalty, but not from costs you might incur should you require medical care.
Whether or not you qualify for an exemption, it’s a smart financial move to obtain alternative health insurance coverage until you can secure minimum essential coverage either through a special enrollment period or next year’s open enrollment period.
A hospital indemnity plan is a good option if you have missed open enrollment for Obamacare. These plans pay a fixed benefit amount and cover you in the event you contract an illness or experience an injury that requires treatment or a hospital stay.
And you can enroll anytime. Since this isn’t an ACA-qualifying major medical plan, you can enroll throughout the year and, if you qualify for coverage, begin to enjoy the peace of mind of health insurance almost immediately.
Call the number on your screen to speak with a knowledgeable hospital indemnity advisor* or submit a quote request to get more information.
If you don’t qualify for an exemption, the only way to avoid the shared responsibility payment is to enroll in a health plan that is considered minimum essential coverage.
There are many coverage types that qualify; they include, but are not limited to:
Some of these options are available for enrollment year-round, others are subject to annual open enrollment and require a “special enrollment period” in order to enroll outside of that timeframe.
If you do go without minimum essential coverage for more than a single period of up to three months in a calendar year, you may owe the shared responsibility payment. How much you will be required to pay depends on the year and how long you were uninsured.
The shared responsibility payment increases annually, and for every month you are uninsured and not exempt, you will owe 1/12th of the annual payment.
The 2018 ACA penalty amounts aren’t available yet. But the 2017 penalty was whichever amount was higher, as follows:
If you went without minimum essential coverage in 2017, you will owe the penalty when you file your 2017 taxes in 2018. Accordingly, the 2018 penalty is paid when you file your 2018 taxes in 2019.
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Originally posted November 11, 2015. Reviewed and updated December 29, 2017.
1 IRS.gov. “The Individual Shared Responsibility Payment – An Overview.” Last updated Feb. 19, 2015. https://www.irs.gov/Affordable-Care-Act/The-Individual-Shared-Responsibility-Payment-An-Overview
2 Internal Revenue Service. “Individual Shared Responsibility Provision – Reporting and Calculating the Payment.” Last reviewed or updated Dec. 12, 2017. https://www.irs.gov/affordable-care-act/individuals-and-families/aca-individual-shared-responsibility-provision-calculating-the-payment
*Licensed Insurance Producer