Starting in 2014, the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA), known as “Obamacare”, goes into effect. If you don’t have insurance coverage right now, you might be required to get it — or pay a fine.
What is the Individual Mandate?
Under the PPACA, the individual mandate requires that all Americans be covered by some type of health insurance coverage. The idea is that by requiring universal coverage, there will be fewer emergency room visits by the uninsured. These visits, where the uninsured are required to be treated until they are no longer in life-threatening danger, can raise costs for everyone, since the treatment still costs money, even though the patients can’t afford it.
With insurance coverage for everyone, goes the reasoning, more people will receive preventative care, and there will be fewer instances of people waiting until the emergency room is the only option for treatment.
However, the individual mandate is just that: A mandate that you take steps to make sure that you have insurance. If you don’t get insurance coverage, you will be fined. In 2014 and 2015, the fines aren’t terribly onerous. In fact, for some consumers it might actually be cheaper to pay the fine than get coverage. That changes though as time progresses. By the time 2017 rolls around, the fine for not having insurance coverage is likely to be high enough that insurance is the cheaper option.
How Will You Pay for Health Insurance?
For many of the uninsured, paying for health care coverage is a big deal. How can you afford to pay for this coverage? It’s important to understand a couple of things about how consumers will be expected to pay for health insurance coverage:
- Those on Medicaid won’t see any changes. The Medicaid program remains available, so if you qualify for Medicaid, you get your health care coverage that way, and you don’t have to worry about purchasing health insurance.
- Those with lower incomes, but who don’t qualify for Medicaid will receive subsidies. A sliding scale of need-based information is provided for those who make too much to qualify for Medicaid. You qualify for a subsidy if you make up to 400% of the poverty level. An estimate from the Kaiser Family Foundation recently suggested that about 67% of those in the United States will qualify for either Medicaid or a subsidy.
It’s also possible to exempt yourself from coverage. If you can show that there are no affordable options for you, even with subsidies, then you can avoid purchasing coverage and avoid the fine. Additionally, there are some very specific circumstances that exempt you from the insurance purchase requirement.
How Do You Claim a Subsidy?
If you qualify for subsidized health insurance coverage, it’s fairly easy to claim it. When you sign up for the insurance, you can apply for your subsidy. The government will run a calculation determining how much of your premium should be subsidized, and the government will pay that amount. So, if your premium is $600 a month for your family, and you are eligible for a $400 subsidy, the government will pay that $400 to the insurance company directly. You will then pay the remaining $200 a month on your own.
Another option is to pay the entire amount up front and then apply for a tax credit when you file your return. The tax credit is refundable, so you can get money back from your overpayment of premiums. But you need to be able to afford to pay the premiums up front.
Now is the time to think about your options so that you are prepared for the Obamacare individual mandate in 2014. Consider your options, and determine what is likely to work best for you.