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Do You Have to Buy Health Insurance?

By Lisa Zamosky

confused woman on computer

One of the most common questions I get from people about the Affordable Care Act and the insurance marketplaces is: “Do I have to sign up for a health plan?”

Many of the people asking the question are those who already have health insurance; some have very low incomes and are fearful they’ll be required to buy coverage they can’t afford.

Here’s a look at who has to buy insurance, what happens to those who don’t and who is exempt from the law’s new requirements.

Who Has to Buy Insurance?

The health reform law does require most Americans to have health insurance starting in 2014. If you don’t have coverage, you’ll have to pay additional taxes. This requirement of the health reform law is referred to as the “individual mandate.”

The online health insurance marketplaces, however, are mostly for people who currently buy their own health insurance, those who are uninsured and small businesses with fewer than 50 people.

What if I’m Already Covered?

You won’t need to buy a new health plan or make any chances to your current coverage if you already have health insurance through one of the following:

  • An employer
  • Coverage you buy on your own (There’s a caveat here: if you buy insurance on your own you may wish to shop the marketplaces, especially if you qualify for financial help to lower your costs. You may also need to shop the marketplaces if you currently have a health plan that doesn’t meet the minimum requirements under the law).
  • Medicare
  • Medicaid
  • Children’s Health Insurance Program (CHIP)
  • Veteran’s Administration and/or Tricare for active duty and retired military
  • Indian Health Services
  • Healthcare sharing ministry

What Happens If You Don’t Buy Insurance?

The tax penalty starts fairly low and then rises over a period of three years. The graph below shows what you’ll pay when you file your income taxes each year if you opt not to purchase insurance coverage:

Year Percentage of Income Set Dollar Amount  

Individual/Family

2014 1% /5
2015 2% 5/5
2016 2.5% 5/,085

 

Are You on the Hook?

Not everyone is required to have health insurance. You won’t be required to have coverage or pay a penalty if:

  • Even the lowest cost health insurance option available to you costs more than 8% of your income.
  • You don’t file taxes because your income falls below the threshold required to do so (roughly less than ,000 for an individual)
  • You are a member of certain religious sects or health care sharing ministries.
  • You are of Native American descent and are eligible for services through an Indian health care provider (your dependents are exempt as well).
  • You are incarcerated.
  • You are an undocumented immigrant.
  • You have less than a 3-month gap in your insurance coverage.
  • Your income is low and you live in a state that is not expanding its Medicaid program.
  • You are a dependent of someone with an offer of affordable individual insurance through an employer, and cannot afford insurance without federal tax credits to help lower your insurance costs.

What confuses you about the Affordable Care Act? Share your thoughts and questions below.

 

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