Guest Blog by Ciara Johnson, RWV-NY Intern and MSW Student at Columbia University
The rate of uninsured people in the United States has dropped to 11 percent, according to a Gallup poll released earlier this month. That’s the lowest uninsured rate since Gallup began tracking it eight years ago. Still, that is a lot of people facing potential penalties as this year’s tax deadline approaches. What do you need to know if you are one of these uninsured people, or you are someone working with uninsured people? Here are a few tips.
The penalty for not having health insurance has gone up again this year. April 18 (yes, the IRS has changed the deadline for this year!) is the third tax deadline for which the Affordable Care Act (ACA) penalties for not having health insurance will apply. According to the healthcare.gov, this year’s penalty went up from 2 percent to 2.5 percent of your yearly household income. With the increase, you will have to pay roughly $695 per adult and $347.50 per child under 18. The maximum penalty, which is equal to the cost of the yearly premium for a bronze plan, is $2,085.
Anyone who can afford health insurance as determined by your yearly income, but chooses not to buy it, will have to pay a penalty.
Who is exempt from the tax penalty? Generally, whether you qualify for an exemption from the tax penalty depends on your household income. If the lowest priced bronze-level health plan available to you through the health insurance marketplace in your state costs more than 8.05% of your household income, then your coverage is considered to be unaffordable. In this case, you can claim an exemption by filling out and submitting IRS Form 8965 with your 2015 tax return. You can also mail in an exemption application.
An exemption can also be granted based on a number of circumstances. Many are “hardship” exemptions for people who have suffered bankruptcy, the death of a close family member, eviction, homelessness, caring for an ill family member or other disruptive life events. Other exemptions are for categories of people, such as Native Americans and people who have religious objections to medical care. For more information on the exemptions process, visit healthcare.gov.
Couldn’t afford the expensive coverage your employer offered? You will qualify for an exemption from the tax penalty if you can show that the cost of the coverage would have been more than 8.05 percent of your income.
What if you had health insurance for part of the year? If you only lacked coverage for one or two months during 2015, then you will qualify for the “short gap exemption” from paying the penalty. If you were uninsured for a longer period, you will pay a fee that is a pro-rated fraction of the annual penalty. So, for example, if you were uninsured for six months, you would pay half the annual penalty.
If you are facing a penalty, can you sign up for coverage now and avoid paying it? No. In previous years, there was a special enrollment period that allowed still uninsured people to apply for affordable private health insurance through the ACA marketplaces at tax time. However, there is no special enrollment period this year for those facing penalties for being uninsured in 2015.
The next open enrollment period for marketplace coverage starts November 1. It would be a good idea to mark this date on your calendar if you are still uninsured and facing a tax penalty this month. However, be aware there are some circumstances in which you can apply for coverage before then. For example, if you experience a “qualifying life event,” such as getting married or having a child (and in New York, becoming pregnant or suffering from domestic violence or spousal abandonment), you may apply for coverage right away during a Special Enrollment Period. In addition, people can apply for Medicaid and Children’s Health Insurance year round. Examine whether you might qualify for one of these options by contacting a Navigator, or going to New York’s Marketplace, NY State of Health.
If you do have health insurance coverage, how must you prove this when filing your tax return? You are not required to submit proof of health care coverage when filing your tax return, but you should keep these records on hand to verify coverage if necessary. Acceptable forms of proof of insurance include: 1095 information forms sent to you by your insurer or employer, insurance cards, explanation of benefits statements from your insurer, W-2 or payroll statements reflecting health insurance deductions, records of advance payments of the premium tax credit and other statements indicating that you, or a member of your family, had health care coverage.