The message on signs at BlueCross BlueShield’s Health Insurance Marketplace registration efforts morphed in early March from “get health insurance” to “avoid the penalty.”
And with less than 10 days left in the 2014 window to apply for coverage with policies through the federal marketplace, lots of people still don’t understand the penalties. Who pays? Who doesn’t? How do you pay? How do you avoid paying?
Toni McKinnon of Columbia stopped by Richland Library’s main branch on Assembly Street last week to find out about the health insurance marketplace because she was worried about having to pay a penalty.
“When you’re living paycheck to paycheck, you can’t afford insurance,” McKinnon said, “and you sure can’t afford to pay some kind of penalty.”
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She left the library slightly confused and very disappointed. Because her annual income this year is below $11,500, she’s in the gap created when South Carolina turned down the expansion of Medicaid. She doesn’t make enough to qualify for tax subsidies to help pay for insurance, and she only qualifies for limited family planning coverage from Medicaid as the low-income parent of a 4-year-old.
But at least she won’t have to pay a penalty next year for not having health insurance – unless her 2014 income rises above the $15,800 level.
McKinnon is typical of the health insurance shoppers showing up at marketplace registration efforts staged by community groups or stopping by BlueCross’ traveling sales van in shopping center parking lots.
“So many people are still looking for information,” said Adam Myrick, a spokesman for BlueCross BlueShield of S.C. who has traveled around the state with the sales van. “People are showing up and saying ‘What do I do?’ They’ve seen so much coverage on it, and they still don’t understand how it’s working.”
With that in mind, here are some of the basics, focusing on the penalty phase of the Affordable Care Act:
This is the real deadline.
After March 31, you won’t be able to get a policy on the federal Health Insurance Marketplace for 2014 unless you have a “life event” that changes your insurance situation, such as marriage, birth of a child, loss of insurance through losing a job. UPDATE: On Tuesday, the administration changed the deadline, saying an overwhelming number of people trying to sign up in the final week has strained the healthcare.gov system’s ability to handle them all by the deadline. Now, people who started the registration process before March 31 will be allowed to continue the purchase of policies on the marketplace in early April.
You might face a real fine.
Many documents refer only to the $95 penalty for not having health insurance in 2014. But the actual penalty is whichever is greater, $95 or 1 percent of annual income. Of course, nothing about the ACA or taxes is simple. For instance, the first $10,150 somebody earns isn’t used to calculate the penalty. That means somebody making less than $19,650 will pay the $95 minimum. If you make $30,150, your penalty will be $200 in 2014. The penalty goes up to a minimum of $325 or 2 percent of income in 2015. The head of a household is responsible for uninsured children, with a fine of $47.50 per or 1 percent of family income, for a child younger than 18.
In S.C., one large group is exempt from the penalty.
In states that turned down the expansion of Medicaid, including South Carolina, anyone making less than 138 percent of the federal poverty level doesn’t face the insurance mandate fine. So anyone making less than about $15,800 in South Carolina is exempt from the insurance fine. About 1.4 million people in the state make less than $15,800, but many of those are elderly and have some form of insurance. Experts estimate about 300,000 low income residents in the state who don’t have insurance will be exempt from the penalty because of their income.
Some others are exempt from the penalty.
Native American groups, illegal immigrants, jail inmates and members of religious groups opposed to medical care are exempt from the insurance requirement. But don’t think you can form your own religion and claim that exemption. The original rules require that the religion has been around since 1950. And you’ll have to turn down any Social Security benefits related to medical care, too.
Medicare is insurance.
If you’re covered by Medicare, you don’t face the penalty. Advocates for the Affordable Care Act have been stunned at how many people older than 65 who have showed up at information sessions or registration efforts. They don’t need to worry about the Health Insurance Marketplace or penalties for not having insurance.
You only need coverage part of the year.
The Affordable Care Act regulations allow a three-month gap of non-coverage during a year. That’s why you’re OK if you get coverage by the end of March. Even though insurance purchased this week likely won’t go into effect until May 1, the penalty will be waived if you have purchased insurance by March 31.
You need to apply for some exemptions.
Some exemptions can be claimed when you fill out your tax forms in 2015, but experts suggest people who expect to claim an exemption go to healthcare.gov/exemptions and fill out forms to get pre-clearance for that exemption.
The IRS is in charge of the penalty.
You won’t owe a fine until you report on your 2014 taxes that you didn’t have insurance. You don’t have to file that tax return until April 15, 2015. Any fine would be deducted from your tax refund. The process doesn’t allow garnishment of wages. If other components of the process so far are any indication, details of the process of paying the fine could be tweaked in the next year.