If you've recently lost your health insurance, or have been putting off enrolling in a plan, February 15 may be your last chance of the year to purchase a policy for 2015 through the Affordable Care Act, which is likely to be the least expensive way to buy insurance.
The tax penalties for not being insured are twice as high for 2015 as they were for last year – 2% of your annual household income, or $325 per adult and $162.50 per child, whichever is higher. This is up from just 1% in 2014 and will rise to 2.5% in 2016. (Note that you can be uncovered for less than three months, after which you'll be assessed 1/12 of the penalty for each month that you're uninsured.)
Whether you're young and healthy, never go to the doctor or have a high enough income to think you can handle whatever comes up, it pays to take another look at the relative costs. While the tax penalties may indeed be cheaper than the cost of the lowest premium health insurance, if you have even a minor medical emergency it can cost you a bundle. And there's no putting a price on the peace of mind that comes with knowing you and your family are covered when health needs arise.
Here's a quick guide to finding a policy at the last minute.
Where To Start
To avoid penalties you need to buy insurance that includes essential benefits as defined by the Affordable Care Act. You can preview, compare and buy policies at the healthcare.gov website or call the 24/7 hotline (1-800-318-2596). You can also buy insurance through an agent or broker. If you think you may be eligible for tax credits be sure that they enroll you in a marketplace policy. (Tips On The Health Insurance Marketplace /Exchange explains this. You may also be interested in Where To Find Affordable Health Insurance.)
You don't have to be poor to qualify for tax credits on healthcare.gov policies. For example, a two-person family who earns up to $62,920 a year can qualify for credits. A four-person household can qualify with an income of up to $95,400. And an eight-person household up to $160,360.
What You'll Need
Don't worry about detailing your medical condition. Insurers at healthcare.gov cannot reject you or charge you more because of preexisting health conditions. You will need to supply information about your household size and income. Household size is the number of dependents you list on your income tax return, not how many people live in your home. (Look it up in IRS Publication 501.) Income is the federal taxable wages on your pay stub or income tax return; as you apply you can list certain deductions, such as school tuition costs. You will also need to estimate your expected household income for 2015.
Inexpensive Plans Are Available
If your goal is to spend as little as possible on premiums, consider the bronze plans at healthcare.gov. For example, a couple, both 45 years old, who live in Philadelphia and earn $60,000 a year, have a choice of 40 health plans. The cheapest policy we found is the United Healthcare Bronze Compass HSA 4900. This couple qualifies for a tax credit, which is applied to the premium. Their monthly premium would be $369 a month (it would cost $494 a month without tax credit). It has an estimated total family deductible of $9,800 a year, and a $12,900 estimated family total out of pocket.
You May Qualify for Special Enrollment
Anyone can purchase health insurance during the open enrollment period. (Hurry! For 2015 insurance, open enrollment began November 15, 2014 and closes February 15, 2015.) But in special circumstances you can enroll at any time of the year. That applies if you've:
– lost health insurance in the last 60 days because of job loss, divorce or a move outside your health plan's coverage area.
– gotten married, had a baby, adopted a child or had a child placed with you for foster care, or someone in your household has died.
– had a change of income, gained citizenship or lawful presence in the U.S., or been released from prison or detention.
The Bottom Line
Yes, it may be cheaper to pay the tax penalties than to buy even the least expensive health insurance policy, but the tax penalty buys you nothing. Even if you're in perfect health, the costs of an unexpected accident or emergency can be breathtaking.
For example, if you needed to have your appendix removed, it cost an average of $33,000 nationwide and as much as $180,000 in some locales in 2009. One 20 year old from Sacramento, Calif., reported being billed $55,000 for the procedure in October 2012. While his insurance paid most of it, he had to pay more than $11,000 from his own pocket. So even if you have insurance, do check the maximum amount of out-of-pocket costs you might be required to pay in a year. Many people will need both insurance and personal savings to handle the unexpected.
If you miss the deadline and aren't eligible for an exemption, you can still buy insurance from an insurance company or broker and minimize any tax penalties. However, you won't be eligible for marketplace subsidies and other benefits of the Affordable Care Act.
