The Affordable Care Act (ACA) remains law in 2018. That means most Americans must have health insurance as required by the individual shared responsibility provision(“individual mandate”). If they don’t, tax penalties still apply for tax year 2018.
That all changes in 2019.
In December 2017, President Trump signed into law a tax bill eliminating the tax penalty for individuals without insurance.1 The penalty will be officially repealed for the 2019 coverage year, so you won’t be penalized if you don’t have health insurance that’s considered minimum essential coverage (e.g., major medical insurance).
What does the tax penalty repeal mean for you?
Here are some quick answers to your individual mandate and tax penalty-related questions about health insurance this year and in future.
Has the ACA been repealed?
No. The Affordable Care Act, which is commonly referred to as Obamacare, remains law.2
As such, premium tax credits will continue to be available to those who qualify based on income, and the ACA’s other provisions still apply (for example: coverage is guaranteed regardless of health history and you can’t be charged more due to health status).3
Was the individual mandate repealed?
No. The individual mandate technically remains in effect.4
It is important to note that the ACA’s individual shared responsibility provision (the mandate that you purchase health insurance) and the individual shared responsibility payment (the tax penalty you owe for failing to purchase health insurance) are two different things. The first part was not repealed, the second part was repealed.
The Republican-sponsored tax reform bill signed into law on Dec. 22, 2017, repeals the individual shared responsibility payment, the tax penalty you owe if you fail to maintain minimum essential coverage.5
In plain language, that means that even though the mandate is technically still in effect, there will be no penalty if you don’t comply starting with the 2019 coverage year.
The repeal didn’t take effect right away, and it is not retroactive. That means you could owe the payment when you file your taxes in 2019 if you did not have minimum essential coverage in 2018.
If the individual mandate isn’t enforced, will I need health insurance in 2019?
Only you can decide whether or not to enroll in a major medical insurance plan for 2019. Major medical plans qualify as minimum essential coverage under the Affordable Care Act. That means they satisfy specific requirements such as being guaranteed issue, not costing more based on health history, and including no-cost preventive services and 10 essential health benefits.
You may have health-, life- or budget-related reasons for exploring alternative coverage options such as short term health insurance, hospital insurance, or a short term and hospital insurance combination. These policies are available year-round, do not adhere to ACA standards, are not minimum essential coverage, and may not be available to those with pre-existing conditions. However, they are another coverage option for those who qualify, and starting in 2019 you will not be penalized if you buy these plans instead of major medical insurance.
You don’t have to go it alone. If you need help determining which coverage to buy, talk with a licensed health insurance producer. Find local assistance using Agent Finder. You can also call the number on your screen to speak to a health insurance producer from HealtheDeals.com.
When does the tax repeal take effect?
- 2018 – you could owe a penalty when you file your 2018 taxes in 2019
- 2019 – you will not owe a penalty when you file your 2019 taxes in 2020
Will the IRS enforce the penalty for tax year 2018?
Following President Trump’s Executive Order 13765 in January 2017, the IRS stated that it would accept returns from taxpayers who did not indicate their coverage status.7
That wasn’t the case for the 2018 filing season. The IRS clearly stated it would enforce the penalty for tax year 2017.8 No announcement has been made regarding the 2019 filing season for tax year 2018. Be sure to consult a tax professional to discuss your specific circumstances.
Summary + next steps
Effective January 1, 2019, the tax repeal means you will not be financially penalized for going without minimum essential coverage. Major medical insurance remains your best bet if you want the most comprehensive health benefits available and coverage that adheres to all ACA requirements. If you want to explore alternative coverage options for 2019, then you can do so without owing a tax penalty.9
Learn more about alternative and supplemental health insurance.
Are you in between jobs or using an ACA?Short-term medical insuranceis a low-cost alternative health insurance option to help out in case an unexpected illness or injury lands you in the hospital while you’re without major medical.