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Think You’re Safe From The Health Insurance Tax? Think Again!

Previously, if Americans did not have health insurance, they would face a penalty, or tax, called the individual mandate penalty. Thanks to the Tax Cuts and Jobs Act, the penalty no longer exists. However, some states still have the ability to penalize people for not having health insurance.

womans hands with a calculator on top of an open laptop. — *Although the individual mandate is gone, some states will tax you for not having health insurance.*

Massachusetts, New Jersey, and Washington D.C. will hit you with a penalty for not having health insurance. Other states (California, Rhode Island, and Vermont) are joining the bandwagon and creating a health insurance coverage mandate for 2020. So if residents do not have health insurance in 2020, then they will pay a penalty in 2021.

Exemptions

States will allow exemptions, thankfully, to help certain people avoid the penalty. The circumstances include low income that falls below the state tax filing threshold.

How Much Is The Penalty?

The penalty ranges in different states. They are:

silhouette of a man shaking another man upside down with money falling out. — *If you live in one of the states that impose a health insurance tax, be prepared for the penalty if you do not have health insurance.*

California- A flat amount of $695 per adult or $347.50 for each child. California can charge you 2.5% of gross income in excess of the state’s filing threshold, whichever is higher.
Massachusetts- The penalty is based on the household income, and can range from $264 per year to $1.524 per year. Individuals with income at or below $18,210 ($37,650 for a family of four) aren’t penalized
Washington D.C.- The penalty is $695 per adult, or $347.50 per child. Washington can also assess a penalty of 2.5% of household income, whichever is higher.
New Jersey- The penalty is based on household income as well. Individual taxpayers without coverage could be on the hook for at least $695, and up to a maximum of $3,012.
Vermont– Vermont is one of the states jumping on the bandwagon, so they have not determined the penalties yet.
Rhode Island- The penalty is a flat tax of $695 per adult and $347.50 per child, or 2.5% of income above state filing threshold, whichever is greater.

Getting Ready

When the time comes to file your tax paperwork, make sure you have all the appropriate forms handy that prove you had health insurance coverage. There should be a number of forms in the mail coming to taxpayers (Forms 1095-A, 1095-B and 1095-C) that detail whether you and your family members had coverage throughout the year.

Luckily only a few states are imposing the tax penalty for not having health insurance, but for those who do live in these states, be prepared. Know that there is a penalty so you are not blindsided, and if you opt out of insurance, then be prepared financially to pay the penalties.

Does Trumpcare Exist?

When President Trump took office, one of his campaign promises was to get rid of Obamacare also known as the Affordable Care Act (ACA), and replace it with new health care. Trump delivered on this campaign promise, providing Americans with Trumpcare, also known as the American Health Care Act (AHCA). Trumpcare was voted on, and passed in the House on May 4, 2017. Since being passed, the number of Americans getting health insurance has gone up by 7 million. There are some similarities between Obamacare and Trumpcare. So why have Americans been signing up for insurance more now with Trumpcare?

Chart with blue bars increasing in size with a red line drawn over them. — *Since Trumpcare was introduced, more Americans have been signing up for health insurance.*

Short Term Plans

Short term plans used to have limitations of 3 months. As of October 1st, 2018, the short term health plans have a one-year policy term. Short term health insurance provides fast, flexible insurance with many benefits. You may pick your deductible amount from many options. You are also able to drop coverage without a penalty for a long term insurance option. Premiums are lower than ACA health insurance plans, and you get coverage as soon as a day after applying.

Once someone signs up for a one-year short term plan, they may potentially renew it for up to three years. Insurers can ask medical questions and possibly reject consumers due to pre-existing conditions for a short-term policy. Once approved for the plan, if a consumer develops a ‘pre-existing condition’, rejection can occur during the renewal process

Individual Mandate

Obamacare enforced an individual mandate penalty for Americans who did not have insurance. The individual mandate was the requirement of people to obtain health insurance for the year, and if not then you had to pay a penalty during tax season. In December 2017, President Trump eliminated the individual mandate from Obamacare. Trump did away with the individual mandate because Republicans believed it discouraged people from buying insurance that costs just as much as the uninsured penalty.

Pre-existing Conditions

Like Obamacare, Trumpcare protects people with pre-existing conditions. People who stay insured, without a gap in coverage, will not pay a price for health insurance based on pre-existing conditions. No insurance plan can reject you, charge you more, or refuse to pay for essential health benefits for any condition you had before your coverage started. However, Trumpcare has given the states authority to change the pricing for people who do not stay insured

A sign with "health" on it point to the right with another sign below it saying "illness" pointing to the other. — *Pre-existing conditions are covered under Trumpcare, but people with them may have to pay more.*

year round. In other words, once you choose to be uninsured, and stay uninsured for an extended period of time, you will face a higher rate for health insurance due to your pre-existing conditions.

Federal Invisible Risk Sharing Program

Trumpcare created the Federal Invisible Risk Sharing Program. It is a pool of funds the government sets aside to assist insurance companies in covering people with high expenses (people with pre-existing conditions). The risk pools are invisible to the customer. This means that high medical cost individuals would not know they’re in the risk pool. They are expected to pay the same cost for insurance as healthy people.

Trumpcare does exist, and has been slowly replacing Obamacare. Getting rid of the individual mandate, and extending short term plan’s length has been Trumpcare’s biggest changes, and main focus. These changes were made in hopes of getting more Americans to sign up for insurance, because the more that people sign up (especially healthy people), then the lower the insurance costs will be. Since more Americans have been signing up for health insurance, hopefully the costs will begin to go down.

Texas Judge Rules Obamacare Unconstitutional- What This Means For The Future

Just before Christmas, a federal Texas judge, Reed O’Connor, ruled that the entire Affordable Care Act, also known as Obamacare, was unconstitutional. This all began December 2017, when President Trump eliminated the individual mandate from Obamacare. The individual mandate was the penalty people had to pay during tax season if they did not get health insurance for the year. When the mandate was officially gone, many states decided to take action against the ACA, filing a lawsuit deeming the ACA unconstitutional. Texas is the first state to rule against the ACA’s validity. Obamacare may now face some challenges. However, as of now the ACA open enrollment will still take place for 2019, and people will still get coverage.

*Texas judge ruled Obamcare (ACA) unconstitutional, making it invalid.*

If the ACA is completely dismantled, then this means that other provisions would go away as well. This includes pre-existing conditions, young adults staying on their parents’ insurance until the age of 26, and the coverage of “essential benefits” such as mental health, prescription drugs, and maternity.

The ACA Holds Up For Now

In response to the judgement from O’Connor, Obama wrote “it’s so important for you to know that last night’s ruling changes nothing for now. As this decision makes its way through the courts, which will take months, if not years, the law remains in place and will likely stay that way. Open enrollment is proceeding as planned today. And a good way to show that you’re tired of people trying to take away your health care is to go get covered! A lot of good people are fighting to ensure that nothing about your care will change. The ACA protects your pre-existing conditions, no matter how you get your insurance. Young people can stay on their parents’ plans until they’re 26. Preventive care like checkups, mammograms, and contraceptive care are still covered. Mental health care is still covered. Women can’t be charged more just for being a woman. All of that is guaranteed by the ACA as long as it’s the law.”

Trump on the other hand was happy of the judgement stating in a tweet, “It was a big, big victory by a highly respected judge, highly, highly respected in Texas, and on the assumption that the Supreme Court upholds, we will get great, great health care for our people. We’ll have to sit down with the Democrats to do it, but I’m sure they want to do it also.”

*As of now, Obamcare will be available for 2019. The future of the ACA is unkown, especially not until 2020 after the high court hears Texas’ case.*

What The Future Holds

While legal experts predict that the decision will be overturned by the high court, it will not be likely to take place until 2020. Until then, the ACA law is not yet invalidated, even though enrollment has taken a hit. Enrollment is down by 12% compared to the previous year. The ACA has withheld a lot over the years, and only time will tell it’s future, but as for now, it is here to stay.

Trump Promises To Protect Pre-Existing Conditions

Over the years, President Trump has been slowly picking away at Obamacare, also known as the Affordable Care Act. But there has been one section of the ACA that he intends to keep, which is the pre-existing conditions clause. Trump recently stated he was going to “totally protect people with pre-existing conditions.” Despite the Trump Administration putting the provision in jeopardy, Trump is stating he backs it and that Democrats do not.

*Trump promises to protect and cover pre-existing conditions, even after the ACA is gone.*

The controversy all began when Trump was running for presidency. One of his promises was to get rid of Obamacare, and so far he has kept that promise. Over the years, he has gotten rid of the individual mandate. This mandate stated that people must get health insurance or they will face a penalty. Due to getting rid of this mandate, many states have challenged the ACA’s constitutionality in a lawsuit this past February. These states are saying that since the mandate is unconstitutional, then the entire health care is also.

The Promise

Throughout the dismantling of the ACA, Trump is fighting to protect people with pre-existing conditions. He wants to make sure that they are still able to get health insurance, and will not be rejected or pay more because of the conditions. This is all came about as midterm elections were approaching, and he was urging people to vote Republican. In his tweet he stated that Republicans will back those with pre-existing conditions, and that Democrats will not, so “vote Republican.”

Trump administration officials said they will allow states to use federal subsidies to pay for health plans that don’t cover pre-existing conditions. Republicans all over the U.S. back what Trump has said about pre-existing conditions.

*Make sure you plan ahead so that you are covered. Look into a short-term plan, and if it will work for you.*

However, there are many doubts if this will actually hold true. A lot of people are skeptical about the pre-existing provision, especially after the midterm elections. Many see this as an attempt to get people to support Trump. The fact is that premiums may be high for those with pre-existing conditions, and not necessarily protect them.

Short-term plans are being expanded in hopes that people will go for them, which does not offer comprehensive plans. This means they may not necessarily cover pre-existing conditions. But if Trump does truly stand behind protecting pre-existing conditions, he can take some steps to ensure it will be be protected, which we have yet to see.

Once the lawsuit between the states and the government to get rid of the ACA is over, only then will we know what will happen with pre-existing conditions. This can cost a lot of people looking for health insurance a lot of money, and even possibly be denied coverage.

Tag: individual mandate

Think You’re Safe From The Health Insurance Tax? Think Again!

Exemptions

How Much Is The Penalty?

Getting Ready

Texas Judge Rules Obamacare Unconstitutional- What This Means For The Future

The ACA Holds Up For Now

What The Future Holds

Trump Promises To Protect Pre-Existing Conditions

The Promise

Business

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