FAQ: What Are The Penalties For Not Getting Insurance?


If you’re uninsured, you may have questions about possible penalties for not having coverage. The fine may be bigger than you expect. Here are the details:

Is everyone required to have health insurance or pay a fine?

FAQ: What Are The Penalties For Not Getting Insurance?

Most people who can afford to buy health insurance but don’t do so will face a penalty, sometimes called a “shared responsibility payment.” The requirement to have health insurance, which began in 2014, applies to adults and children alike, but there are exceptions for certain groups of people and those who are experiencing financial hardship.

What kind of insurance satisfies the requirement to have coverage?

Most plans that provide comprehensive coverage count as “minimum essential coverage.” That includes job-based insurance and plans purchased on the individual market, either on or off the exchange. Most Medicaid plans and Medicare Part A, which covers hospital benefits, count as well, as do most types of Tricare military coverage and some Veterans Affairs coverage.

Insurance that provides limited benefits generally does not qualify, including standalone vision and dental plans or plans that only pay in the event someone has an accident or gets cancer or another specified illness.

If I don’t have health insurance, how much will I owe?

For 2014, the penalty is the greater of a flat $95 per adult and $47.50 per child under age 18, up to a maximum of $285 per family, or 1 percent of the portion of your family’s modified adjusted gross income that is more than the threshold for filing a tax return. That threshold is $10,150 for an individual, $13,050 for a head of household and $20,300 for a married couple filing jointly.

For 2015, the penalty increases to $325 per adult or 2 percent of income, and in 2016 it will be the greater of $695 or 2.5 percent of income.

The $95 penalty has gotten a lot of press, but many people will be paying substantially more than that. A single person earning more than $19,650 would not qualify for the $95 penalty ($19,650 – $10,150 = $9,500 x 1percent = $95). So the 1 percent penalty is the standard that will apply in most cases, say experts. For example, for a single person whose modified adjusted gross income is $35,000, the penalty would be $249 ($35,000 – $10,150 = $24,850 x 1percent = $249).

The penalty is capped at the national average price for a bronze plan, or about $9,800, according to Brian Haile, the former senior vice president for health policy at Jackson Hewitt Tax Service. The vast majority of taxpayers’ incomes aren’t high enough to be affected by the penalty cap, he says.

Many more people will be able to avoid the penalty altogether because their income is below the filing threshold.

If I owe a penalty for not having insurance in 2014, how do I pay it?

If you had health insurance for only part of 2014 or didn’t have coverage at all, you’ll have to file Form 8965, which allows you to claim an exemption from the requirement to have insurance or calculate your penalty for the months that you weren’t covered.

What if I just realized I face a penalty for 2014. Can I do anything to avoid a penalty next year?

Open enrollment for 2015 coverage ended Feb. 15 but there is  a special enrollment period from March 15 to April 30 for uninsured consumers who are just learning of the penalty. That provision applies only to people in the 37 states that use the federal exchange, healthcare.gov, but many of the states running their own health marketplaces have made similar offers.

Are there other circumstances that allow me to get insurance outside the annual open enrollment period?

Yes. If you have a change in your life circumstances such as getting married, adopting a child or losing your job and your health insurance, it may trigger a special enrollment period during which you can sign up for or change coverage and avoid paying a fine. In addition, if your income is low and meets guidelines in the law, you can generally sign up for your state’s CHIP or Medicaid program at any time.

I was uninsured last spring and signed up on the exchange in March 2014 for a plan that started May 1. Will I owe a penalty for the first four months of the year?

No. In October 2013, the Department of Health and Human Services released guidance saying that anyone who signed up for coverage by the end of the open enrollment period on March 31 would not owe a fine for the months prior to the start of coverage.

What if I have a gap in coverage after open enrollment ends? Will I have to pay a fine?

It depends. If the gap in coverage is less than three consecutive months, you can avoid owing a penalty. Subsequent coverage gaps during the year, however, could trigger a fine.

If you have coverage for even one day during a month, it counts as coverage for that month. The penalty, if there is one, would be calculated in monthly increments.

Are parents responsible for paying the penalty if their kids don’t have coverage?

They may be. If you claim a child as a dependent on your tax return, you’ll be on the hook for the penalty if the child doesn’t have insurance. In cases where parents are divorced, the parent who claims the child as a tax dependent would be responsible for the penalty.

Who’s exempt from the requirement to have insurance?

The list of possible exemptions is a long one. You may be eligible for an exemption if:

  • –Your income is below the federal income tax filing threshold (see above).
  • –The lowest priced available plan costs more than 8 percent of your income.
  • –Your income is less than 138 percent of the federal poverty level (about $16,105 for 2015 coverage for an individual) and your state did not expand Medicaid coverage to adults at this income level as permitted under the health law.
  • –You experienced one of several hardships, including eviction, bankruptcy or domestic violence.
  • –Your individual insurance plan was cancelled and you consider plans on the marketplace are unaffordable.
  • –You are a member of an Indian tribe, health care sharing ministry or a religious group that objects to insurance.
  • –You are in jail.
  • –You are an immigrant who is not in the country legally.

For a more complete list go to the exemptions page at  healthcare.gov or the questions and answers page on shared responsibilities provisions on the IRS website.

When should I claim or file for an exemption?

There’s no one-size-fits-all answer. You can claim some of the exemptions when you file your tax return in 2015, but for others, you will have to complete an exemption application available at healthcare.gov.

Are U.S. citizens living overseas subject to the penalty for not having insurance?

If you live abroad for at least 330 days during a 12-month period, you aren’t required to have coverage in the States.

What happens if I don’t pay the penalty?

The IRS may offset your income tax refund to collect the penalty, but that’s about it. Unlike other situations where the tax agency can garnish wages or file liens to collect unpaid taxes, the health law prohibits these activities in cases where people don’t pay the penalty for not having insurance.

This story was originally published March 24, 2014.