A week or two ago, I received a letter from my employer detailing the requirements of the Affordable Care Act (ACA, or Obamacare).
Apparently this notification, which included general information about the ACA as well as detailed information about our current coverage, is a requirement under the law.
Why? Mainly because people are now being required to carry health insurance. But if you already have coverage that you like, you probably won’t be affected.
The individual mandate
The reason for this requirement to carry health insurance — the so-called ‘individual mandate’ — is simple: under the new law, insurers are no longer allowed to deny coverage or charge more based on pre-existing conditions.
Thus, if people weren’t compelled to carry insurance, they could simply wait until they got sick to buy insurance. If such behavior became widespread, as it undoubtedly would, the system would collapse.
In other words, the individual mandate is the price you have to pay for things like coverage of pre-existing conditions.
Penalty for lack of coverage
What happens if you defy the law and don’t buy health insurance? Well, you’ll be subjected to a fine — and you’ll still be on the hook for the costs of your healthcare.
In 2014, the penalty will start at $95/adult, $47.50/child, or $285/family, ranging as high as 1% of your annual income. For purposes of this calculation, your income is assumed to be the amount in excess of the filing threshold (so subtract $10k for an individual, $20k for a family in 2013).
In 2015, the penalty will start at $325/adult, $162.50/chile, or $975/family, ranging as high as 2% of your annual income.
And in 2016, the penalty will start at $695/adult, $347.50/child, or $2,085/family, ranging as high as 2.5% of your annual income.
In all cases, the penalty will be capped at the average annual cost of a “bronze” level plan, which is the lowest tier of coverage available through the Marketplace.
It’s important to keep in mind, however, that even after paying the fine, you won’t have coverage and will still be on the hook for your medical costs. Thus, you might as well go ahead and sign up if required to do so, especially in future years.
There are some exemptions for things like those with low incomes, documented hardships, etc., so be sure to read up on the details if you’re not sure.
Do I have to sign up?
So… Back to my situation. As it turns out, my employer’s plan qualifies me for an exemption from the requirements of the ACA. Thus, I don’t have to do a thing.
More generally, if you have one of the following types of coverage, you’re considered “covered” for purposes of the ACA:
- Any plan purchase through the ACA Marketplace
- Any employer plan (including COBRA and/or retiree plans)
- The Children’s Health Insurance Program (CHIP)
- TRICARE (for the military, military retirees, and their families/survivors)
- Veterans health care programs
- Peace Corps Volunteer plans
In contrast, plans that don’t qualify include:
- Those that cover only vision or dental care
- Those that cover only a specific disease or condition
- Those that only offer discounts on medical services
- Workers’ compensation
If you’re not sure, contact your insurance provider for details.