by Chris Huckins Google+ Email 


01 April 2013

Understanding Obamacare: How to Avoid Penalties

Posted in Individual Health Insurance

Understanding Obamacare: How to Avoid Penalties

    "Obamacare is driving me crazy. Do I even need it? I don’t want penalties. Help!"

   This summarizes what most of our clients in Los Angeles ask when signing up for health insurance for the first time. In a nutshell, we tell them, "If you don’t want penalties, you do need to get health insurance. But there’s more to it. There’s always more to it…." So essentially the nutshell euphemism was a lie. Sorry.

    To avoid penalties from Obamacare (Affordable Care Act), first understand that Obamacare isn’t a health insurance plan to enroll in, but a law which mandates all Americans sign up for health insurance by January 1st, 2014 or pay a tax (penalty).

    For those who skip having health insurance through 2014, the IRS will issue each adult a $95 fine on 2014 tax returns or 1% of each adult's gross annual income, whichever is greater. For each child, a $47.50 fine will incur. 

     In 2015, the fine increases to $325 per adult ($162.50 per child) up to a maximum of $975 or 2% of family income, whichever is greater. In 2016, the fine increases to $695 per adult ($347.50 per child) or a maximum of $2,085 or 2.5% of family income. If one has a lapse in coverage that’s less than 3 months, one won’t be taxed. Any amount of time over 3 months in which someone lacks coverage, he or she will receive a fine.

Many feel that the initial penalty for the first year is so low compared to monthly insurance premiums that a better option is to skip enrolling for health insurance altogether. While this might be true for some, the reality is that Obamacare gives subsidies (tax credits) to qualifying Americans (with incomes between 100 and 400% of Federal Poverty Level) to pay for monthly premiums. This essentially lowers the cost for health insurance so it’s affordable or in some cases free.

    If enrolled in any combination of the following: Medicare, Medicaid, Children’s Health Insurance Program (CHIP), the Veteran’s Health Program, a plan offered by your employer, a grandfathered plan which existed before Obamacare was enacted, one won’t be penalized with the aforementioned fines.

    The main point of Obamacare is to get as many Americans enrolled to keep health insurance rates low. Have any other questions about Obamacare? Call us at 818.251.5000 or click below for a free quote!