There’s been a lot in the news lately about whether consumers will have to pay the individual mandate fine for not having ACA compliant health coverage. Late in 2017 President Trump signed an executive order basically stating that some tax returns would now be excepted without the individual penalty (2.5% of income for 2017) included in the tax filing. As far as I can tell this does not mean that the law goes away and it does not mean that the penalty will not be due at a later date. The order simply means that some returns will be accepted now that have not been accepted in the past. If you use an accountant, or a software like Turbotax to do your return, it will likely still factor in the penalty.
Its no secret that the current administration wants to do away with the penalty and this will likely occur in the future. For now though it’s important to only purchase ACA plans, exempt healthshares and group coverage if you want to avoid the penalty. A common sales pitch I’ve heard from call centers selling indemnity plans lately is that the penalty has been removed from the ACA or you don’t have to pay the penalty for one reason or another. While there is a form that we can fill out to request a waiver from the penalty (for things like a recent death in the family or bankruptcy), as of this writing the penalty is still part of the ACA and therefore most people without a compliant policy will be charged when they do their taxes.
So what can you do outside open enrollment to avoid the penalty? Nonprofit healthshares that have been around since 1999 or earlier are exempt from the penalty. These plans are also typically very affordable and offer a wide range of products for all consumer types. Another option if you’re just in between jobs is to do a term plan. If you have compliant coverage the rest of the year and you use a term plan or other coverage for 3 months or less, you typically won’t have to pay the penalty in these situations either. Term plans are often very affordable because the insurance company only commits to a few months of coverage lowering their overall risk exposure.
ACA Fines From the View of an Agent
Leaving a customers house today I’m again amazed at how many people compare the ACA penalty to the cost of purchasing health insurance. Maybe it’s because I’ve been in the business for awhile, long before being penalized for not having health insurance came about. Back when I first started selling health insurance the concern was how do I protect my family, now for a lot of families the concern is how do I pay the least monthly cost. Let’s look at some alternatives to the ACA plans.
First off I understand. Like most things the government gets involved with, they have really screwed up health insurance. Instead of having a market controlled product they have taken are health insurance and attempted to turn it into a socialized product, where everyone is suppose to be treated equal and have equal access. It looks beautiful on paper, but reality is another matter. Coverage that a family of 4 had once expected to lay down $450 a month for now cost well over a thousand dollars a month. This has caused some to forget about health insurance all together. There are other options though.
One thing you want to consider when determining whether to buy an ACA plan is are you eligible for any subsidies. These are funds the government will give you to help you purchase health insurance on your own. Not only will you give up these funds if you choose not to buy health insurance, you’ll have a penalty to pay the government in return for no health coverage.
Have you considered alternatives to the ACA plans? Many consumers have found that it makes sense for them to pay the penalty for not having ACA coverage and purchase an off exchange option available to healthy individuals. Yes, it’s unfortunate you’ll still have the penalty but you’ll have protection in the event somthing happens. This makes sense if you’re in good health and the overall savings of going with an off exchange option is much greater than the penalty (2.5% of adjusted gross income). You have to be careful when purchasing a plan off exchange, not all plans are created equal and some provide very little to no actual coverage. One popular option is a short term medical plan. Especially if you believe health insurance is in for a change with the new administration. These plans work almost identical to the way health insurance worked for the ACA. They don’t cover pre existing conditions and they have a deductible that is met before the plan starts paying and then a maximum amount they will pay (usually 1 million) which helps keep plan cost low. Some also have copays before the deductible is met, so you might pay $30 to go to the doctor or $20 for a prescription.
Lastly, you may want to look into Health Matching Accounts (HMAs) that allow you to save money that gets matched by a company for future medical expenses. You can learn more about HMAs on our website under HMA. No matter what you choose, it’s important to have something to help out in the event of a surprise illness or accident. Always ask to see the policy and the fine print before you sign. Many times call centers will charge a large “application fee” that you’ll lose even if you cancel your policy after you’ve had a chance to review it. See the policy in “black and white” before you give your credit card..
Update 2019: The Trump administration has put a hold on all individual mandate fines starting with the 2019 tax year.