Health care has been a major debate in America for many decades. President Obama attempted to improve the industry and ensure more Americans can gain access to affordable healthcare by enacting the Affordable Care Act, which would, among other provisions, open up the health insurance market, making it more competitive and cost-effective for all Americans. Those who are above the poverty level don’t qualify for Medicaid and Medicare, but can obtain coverage from their state or federal health insurance marketplace during the annual open enrollment.
To many, the major drawback to Obamacare is the individual mandate. This is a penalty that Americans face if they don’t obtain and maintain minimum coverage throughout the year. Some can file for exemption under certain circumstances and will be able to waive the tax penalty.
The individual mandate first started back in January 2014 and has continued to rise each year ever since. The fine is collected from your federal income tax return and is based on how many months you and your family members went without coverage the prior year.
Your coverage, family size and income all play a role in assessing the cost of your penalty. The penalty you face will either be a flat rate or a percentage of your income, whichever is higher. There is a cap for the fee, which is at the national average for bronze health plans found in the marketplace. It counts for full months you and your family members were without health insurance.
It’s more important now than ever to familiarize yourself with the individual mandate so you don’t end up paying a hefty fine in 2016 and beyond.
The Fine for 2016
When the individual mandate was first introduced in 2014 it was under $400 per adult, but in 2016, this has raised to $695 per adult and $347.50 per child (no more than $2,085 per family). Or you’ll be charged 2.5 percent of your household income that’s above the filing threshold for your filing status. You’ll have to pay whichever amount is greater.
This is a proportional penalty based on the length of time you were uninsured, so you have to pay 1/12 of the fee for every month you or a family member has gone without minimum coverage. You only have to pay 1/12 of the total penalty per full month you’ve gone without coverage, so even if you only had coverage for one day in a month, you won’t have to pay the penalty for that month.
Avoiding the Penalty
There are two ways you can avoid being penalized by Obamacare. The first, and arguably best, is to obtain minimum essential coverage for yourself and family either through your employer’s plan or to apply on the Obamacare marketplace during the open enrollment period.
Alternatively, you can file for an exemption to see if you qualify. These exemptions are based on household income, but by and large it is considered more cost effective to opt for a basic insurance plan and have access to affordable healthcare then to simply pay a fine to the government, without the benefit of insurance coverage.
If you end up missing the deadline, you have to wait until the marketplace reopens unless you are eligible for a special enrollment period. You can also check to see if you are exempt from the penalties. There are a number of criteria you must meet in order to qualify for exemption.