Skip to main content

Category: Frequently Asked Questions

How do I prove that I had coverage and satisfied the mandate?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

Health insurance companies, employer-sponsored health plans, and public health programs such as Medicaid are required to provide you with documentation of coverage.  In January, you should receive a form 1095-B from your health plan or insurance company indicating the months during the prior year when you were covered under the plan.  If you were enrolled in family coverage, Form 1095-B will indicate the names of all family members who were covered with you under the plan. (If you worked for a large employer, with more than 50 employees, you might receive a Form 1095-C instead of Form 1095-B.  Form 1095-C documents an offer of coverage by a large employer in addition to documenting months of coverage under the plan.) A copy of this form will also be reported to the Internal Revenue Service.

If you were covered by more than one plan during the year, you should receive a Form 1095-B (or 1095-C) from each plan.  When you file your tax return for this calendar year (most people will do this by April 15 next year) you will have to enter information about your coverage (or your exemption) on the return.

I lost coverage March 15 and didn’t get new coverage until April 1. Am I considered uninsured for the month of March because I lacked coverage for part of the month?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

No, if you are covered even one day during a month, you are considered to be insured for that month. Similarly, a person who is considered exempt from the individual responsibility requirement for even one day during a month is considered exempt for that month.

I had several short coverage gaps in a year – I was uninsured in March, then again in August. Since the total gap was less than 3 months, am I exempt from the penalty?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

The rule for short coverage gaps is that only the first short coverage gap in a year will be recognized. You wouldn’t be penalized for lacking coverage in March, but you may owe a penalty for your second gap in coverage in August if you don’t otherwise qualify for an exemption during that period.

However for 2018, if you experienced hardship that prevented you from getting coverage, you can claim a hardship exemption directly on your 2018 federal income tax return.

On what grounds can I apply for a hardship exemption to the individual mandate?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

For the 2018 tax year, you can claim a hardship exemption if you experienced any circumstances that prevented you from obtaining coverage.  For the 2018 tax year only, you can claim the hardship exemption directly on your tax return by checking the box on Form 1040.  You will not be required to submit documentation of the hardship with your return, but you should keep any documentation for your own records.

If you are late-filing or updating a tax return for earlier years and require a hardship exemption for that year, you can apply for a hardship exemption if you experienced difficult financial or domestic circumstances that prevent you from obtaining coverage – such as homelessness, death of a close family member, bankruptcy, substantial recent medical debt, or disasters that substantially damaged your property. In addition, a hardship exemption may be granted if you were determined ineligible for Medicaid only because your state hasn’t expanded Medicaid coverage to residents with income up to 138% of the federal poverty level.  You can also apply for a hardship exemption if obtaining coverage would have been so burdensome as to cause you to experience other serious deprivation of food, shelter, or other necessities.

For tax years before 2018, you can apply to the Marketplace for a hardship exemption.  If granted, the Marketplace will give you an exemption certificate.  You should enter that certificate number in Form 8965, which you should file with the tax return.

Are there exemptions to the health care penalty? What are they?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

Yes. For the 2018 tax year, you can claim a hardship exemption if you experienced circumstances that prevented you from getting coverage.  You can claim this exemption directly on your federal tax return, by checking the box on Form 1040, when you file next spring.  You will not be required to provide documentation of your hardship when you file, though you should keep any documentation for your records.

In addition, you may be eligible for an exemption if you:

  • Cannot afford coverage (defined as those who would pay more than 8.05 percent of their household income for the lowest cost bronze plan available to them through the Marketplace in 2018)
  • Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.
  • Had a gap in coverage for less than 3 consecutive months during the year
  • Won’t file a tax return because your income is below the tax filing threshold (For the 2018 tax year, the filing threshold is $12,000 for individuals and $24,000 for married persons filing a joint return)
  • Are unable to qualify for Medicaid because your state has chosen not to expand the program
  • Participate in a health care sharing ministry or are a member of a recognized religious sect with objections to health insurance
  • Are a member of a federally recognized Indian tribe
  • Are incarcerated

What’s the penalty if I didn’t have coverage in 2018?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

The penalty for not having minimum essential coverage is either a flat amount, or a percentage of household income, whichever is greater.

For 2018 the flat amount is $695 for each uninsured adult and $347.50 for each uninsured child, up to $2,085 per family. The percentage penalty is 2.5% of family income above the federal tax filing threshold, which is $12,000 for a single filer, $24,000 for people who file jointly in 2018.  The percentage penalty is also capped at an amount equal to the national average bronze health plan premium available through the Marketplace.  That amount is updated annually in the instructions for IRS Form 8965.

The penalty is based on “coverage months.”  This means that each month you are uninsured in 2018, you may owe 1/12th of the annual penalty.  However, short spells of uninsurance may not be subject to a penalty.

For 2018, if you think you may owe a penalty for not being insured, you can claim a hardship exemption if you experienced circumstances that made it hard for you to get coverage.  With this exemption, you will not owe a tax penalty.  You can claim the hardship exemption right on your tax return by checking a box on Form 1040.  You will not be required to submit any documentation of the hardship with your tax return, though you should retain any documentation for your own records.

For more information about the penalty in 2018, also called the individual responsibility payment, see instructions for Form 8965 on the IRS web site.

I’m uninsured. Am I required to get health care?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

Congress eliminated the federal tax penalty for not having health insurance, effective January 1, 2019.

For 2018, everyone is required to have health insurance coverage – or more precisely, “minimum essential coverage” – or else pay a tax penalty, unless they qualify for an exemption. This requirement is called the individual responsibility requirement, or sometimes called the individual mandate.

While the federal tax penalty still applies for 2018, recent changes will make it easier for people to claim a hardship exemption, and so owe no penalty, when they file their 2018 federal income tax return.

Several states have adopted individual mandates with state tax penalties for not having health insurance.  These include Massachusetts, New Jersey, and the District of Columbia, effective for the 2019 calendar year.  Vermont will impose a tax penalty for not having coverage starting in 2020.  Other states are considering individual mandates; check with your tax adviser for more information.

Regardless of the penalty, it is important to have health coverage if you can.  Health insurance continues to be offered during annual Open Enrollment periods.  If you don’t sign up during Open Enrollment, you might have to wait up to one year until your next opportunity to enroll.

What is the Cadillac tax?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

The so-called Cadillac tax is an excise tax on high cost health plans offered by employers. Beginning in 2020, health plans that cost more than $10,200 for an individual or $27,500 for a family plan will be subject to the tax, which is 40% of the amount that exceeds those thresholds. For example, if a family plan costs $30,000, the employer that offers the plan would owe 40% of $2,500 ($30,000 minus $27,500), or $1,000 for each family it covers under that plan.

The tax was intended to be a disincentive for employers to provide overly rich health benefits, and the cost of the health plan is one measure of the level of benefits. However, some plans may cost more because they cover people with higher-than-average health care costs, including retirees, older workers and workers in high-risk occupations. The cost thresholds for plans that cover a significant number of individuals in any of those categories are higher.

My employer health plan has a wellness feature that requires me to pay a higher premium if I don’t meet certain health targets or if I don’t participate at all. I can’t afford the premiums if I don’t participate or miss the mark. Can I leave my employer-sponsored plan and get one on the health insurance Marketplace?

Written by HummingbirdinsAdmin on . Posted in Frequently Asked Questions.

It depends. If your premium contribution with the wellness penalty would be more than 9.86% of your income in 2019, then your employer plan would be considered unaffordable and you would be eligible to apply for premium tax credits in the Marketplace. This test applies whether you are actually penalized or not, and in advance of the penalty being applied (for example, if your employer gives you time to try to meet the health standard that triggers a penalty or reward).

Similarly, if your employer wellness program applies the penalty to the plan cost sharing (for example, people who don’t participate or who can’t meet the health targets have a higher deductible than would otherwise be the case), and if penalty is high enough to reduce the value of your plan below the “minimum value,” then you would be eligible to apply for premium tax credits in the Marketplace. Again, this test applies whether you are actually penalized or not and in advance of the penalty ever being applied.