The Affordable Care Act, Explained
1:10 pm
Sat October 12, 2013

FAQ: Understanding The Health Insurance Mandate And Penalties For Going Uninsured

Originally published on Fri October 25, 2013 3:16 pm

This is one of several explainers to help consumers navigate their health insurance choices under the Affordable Care Act, or as some call it, Obamacare. Click here for answers to other common questions. Have a question we missed? Send it to health@npr.org. We may use it in a future on-air or online segment.

So I have to carry health insurance?

Yes, just about everyone is required to have insurance as of Jan. 1, 2014, or else they'll be liable for a tax penalty. That coverage can be supplied through your job (including COBRA or a retirement plan), public programs such as Medicare, Medicaid or the VA, or an individual policy that you purchase.

What is the penalty for not having health insurance?

The penalty for not having health insurance, at least for 2014, is up to $95 per adult and $47.50 per child or 1 percent of your taxable income — whichever is greater. It does go up substantially in a couple of years. The amount you owe will be pro-rated to reflect the number of months you were without coverage.

If you owe the penalty, it is assessed on your 2014 income tax form that's due April 15, 2015. And that's how the government finds you — it asks on your income tax form if you had health insurance. People who have it will get some sort of certificate of coverage from their health insurers. If your income is so low that you do not file a tax return, you are exempt from paying the penalty.

How much will the tax penalty go up in future years?

The tax for remaining uninsured goes up substantially starting in 2015. Then, it's $325 per adult and $162.50 per child, or 2 percent of your family's income — whichever is greater. In 2016 and beyond, the tax is higher still: $695 per adult and $347.50 per child, or 2.5 percent of your family's income — whichever is greater.

Can I go to jail if I don't have health insurance?

No, you can't go to jail for not paying the penalty; the government can't even garnish your wages. The most the IRS can do is withhold your tax refund.

If I opt to pay the tax penalty, am I covered with insurance?

No. Paying the tax penalty does not buy you anything. If you decide to go that route, you do not have insurance. You can still see a doctor or go to a hospital, but you'll have to pay all the bills.

What if I don't have health insurance and I get sick or have to go to the emergency room?

If you don't have insurance, you'll get a bill, just as it's always been. If you can't pay, the hospital or other health care provider will still try to collect from you, although there are some provisions of the law aimed at discouraging some of the most aggressive collection tactics that have been used in the past. If they don't collect, the health care provider would have to eat the cost. That's why hospitals were so anxious to have most people covered by insurance, so they could stop having to provide so much free care to people who couldn't pay.

Can I wait until I get sick to sign up for insurance?

No. You can't just sign up when you're sick and facing big medical bills. Otherwise that's what everyone would do. The exchanges under the Affordable Care Act have been designed pretty much the same way most employer insurance plans are: There's an open season every year when you can buy or change plans, and that's generally the only time you can buy or change plans. This year's open season is a lengthy one — it runs from Oct. 1 to March 31, 2014. In future years it will begin in October and end in December of each year.

I've heard there might be some kind of a grace period when it comes to signing up.

Sort of. The IRS has said that people don't have to pay a tax penalty if they have a "short gap" in their coverage. The IRS defined a short gap as lasting less than three months. So if you consider your short gap as starting on January 1, 2014, that's sort of like a grace period. It's complicated, though. Look here for the details.

Is there anybody who doesn't have to have insurance?

Yes, the government has identified exemptions. Individuals who cannot afford coverage because the cost of premiums exceed 8 percent of their household income or those whose household incomes are below the minimum threshold for filing a tax return are exempt. People experiencing certain hardships, including those who would have been eligible for Medicaid under the health law's new rules but whose states chose not to expand their programs, also are exempt.

Other exempt groups include prisoners, Native Americans eligible for care through the Indian Health Service, immigrants who are in the country illegally, people whose religion objects to having insurance coverage, members of a health care sharing ministry and individuals who experience a short coverage gap of less than three consecutive months.

If you are seeking an exemption for incarceration, membership in an Indian tribe or health care sharing ministry, you can apply through the health insurance exchanges or make a claim when you file taxes. If you are claiming economic hardship or a religious exemption, you must get an exemption certificate from the online insurance exchange. If you are claiming that coverage is unaffordable, that you are in the United States without proper documentation or that you have a coverage gap of less than three months, you can make the claim when you file your 2014 taxes in 2015.

Americans who live abroad for at least 330 days within a 12-month period also are not subject to the mandate. Insurance bought on the exchanges generally wouldn't cover them while overseas anyway (neither does Medicare, by the way). Expats need to find insurance that covers them in the country where they live. The State Department keeps this list of companies that provide international coverage. For country-specific information, look here.

See other Frequently Asked Questions on the Affordable Care Act:

Additional coverage from NPR Member Stations:

This FAQ was produced through a collaboration between NPR and Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonpartisan health-care policy research organization. The Kaiser Family Foundation is not affiliated with Kaiser Permanente.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.