Minimum Essential Coverage Fees and Exemptions: A Few Quick Tips For Navigating the Affordable Care Act

The fee for not having health coverage is calculated one of 2 ways. If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay either a percentage of your household income or a flat fee — whichever is higher.

The fee for not having coverage in 2014

If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:

  • 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
  • The fee in 2015

    If you don’t have coverage in 2015, you’ll pay the higher of these two amounts:

  • 2% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.

The fee after 2015

The penalty increases every year. In 2016 it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.

How you pay the fee

You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. Most people will file their 2014 returns in early 2015 and their 2015 returns in early 2016.

Exemptions

You may be exempt from the requirement to maintain minimum essential coverage and thus will not have to make a shared responsibility payment when you file your 2014 federal income tax return in 2015, if you meet certain criteria.

You may qualify for an exemption under one of the following:

1. Religious conscience.

You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.

2. Health care sharing ministry.

You are a member of a health care sharing ministry.

3. Indian tribes.

You are (1) a member of a federally recognized Indian tribe or (2) an individual eligible for services through an Indian care provider.

4. Income below the income tax return filing requirement.

Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).

5. Short coverage gap.

You went without coverage for less than three consecutive months during the year. For more information, see question 22.

6. Hardship.

You have suffered a hardship that makes you unable to obtain coverage, as defined in final regulations issued by the Department of Health and Human Services. See question 21 for more information on claiming hardship exemptions..

7. Affordability.

You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.

8. Incarceration.

You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.

8. Not lawfully present.

You are not a U.S citizen, a U.S. national or an alien lawfully present in the U.S.

Because of the Affordable Care Act, more Americans have access to coverage that is affordable. However, if there is no coverage available to you and your family that costs less than eight percent of your household income, you can qualify for an exemption.

An exemption applies to individuals who purchased their insurance through the Marketplace during the initial enrollment period for 2014, which ran from October 1, 2013, through March 31, 2014. This hardship exemption applied from January 1, 2014, until the start of your health care coverage, which, if you enrolled between March 16 and March 31 would generally have been May 1. Another hardship exemption may apply if you have been notified that your health insurance policy will not be renewed and you consider the other plans available to you unaffordable.

How you get an exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, others only from the IRS, and yet others from either the Marketplace or the IRS.

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