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08-16-2017 04:48 PM
I had major medical health insurance with my employer until March 1 2017. I started a new job but the offered insurance was too costly since I would have had to pay for full year coverage in 3 months (per their guidelines) since it was a 9 month position and ended in May (school environment). I looked into marketplace insurance but it was also costly since I refused my employer insurance. I stayed employed (although not actively working June-July). My husband and I thought we had jobs where we could take individual health plans out however both of those jobs fell through. I have been unemployed since May, although my husband works full time. I was told by an agent for marketplace that we could get short term coverage but it would not help with the penalty and we are not eligible for open enrollment until Jan. What are our options or are there any so that we can reduce the penalty? I see the penalty for 2017 is $695 pp. We live in Nebraska if that makes a difference.
08-16-2017 05:29 PM
Welcome to the H&R Block community.
This is one of my biggest areas of expertise and I'll be glad to help you out.
There are a number of exceptions to the penalty for not having insurance so let's take a look at all of them so you'll know what to expect & what to look for.
The most common exemption is that if your income is below your filing threshold, which is $20,800 for those who are married & filing jointly, then you are automatically exempt from that penalty without having to do anything.
Another possibility is the Medicaid non-expansion exemption. Nebraska is a state that has not expanded the Medicaid program in their state, so you'll qualify for an exception if your income is below 138% of the federal poverty line for your family. For 2016, 138% of the federal poverty line for a family of 2 was $22,100. So for instance if your tax family includes only you and your husband and your joint income is below $22,100 for the year then you are exempt from the penalty.
The third most common exemption is the "unaffordability" exemption. Under the unaffordability rules, if your lowest cost annual premium is greater than 8.13% of your total income (8.13% of your joint income for those who are married & filing jointly) then you are exempt from the penalty. So if, for example, you could get a marketplace premium for $6,000 per year and you also had the option of a premium through work for $4,500 per year, and your joint income is $50,000 per year, then because $4,500 (your lowest cost annual premium) is greater than $4,065 (8.13% of your joint income) you are exempt from the penalty.
You can reduce the penalty in only one way. The penalty is reduced from the maximum amount for the year if you had insurance for some of the months during the year. You said you had insurance for January & February, so your penalty will be automatically reduced by 1/6. Your maximum penalty will already be reduced to $579 rather than $695. If you do not qualify for one of the exceptions that I just described then you can further reduce the penalty by getting insurance for the remainder of the year. If you can get a policy for September through December then you will reduce your penalty by another $232.
There is one more exemption that I haven't mentioned yet. The hardship exemption is awarded on a monthly basis. If for any month you could not pay a utility bill, mortgage/rent payment, etc., then you can apply for an exemption certificate for that month from the marketplace and that will reduce your penalty.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)
08-17-2017 03:52 PM
The unaffordability option is based on income and on your lowest cost health plan.
What is your joint income?
What is the annual cost of the marketplace plan you said you could have gotten? (It is more than likely your lowest cost plan.)
If you can answer those two questions I'll be able to figure out if you qualify for unaffordability as well as if you qualify for any of the other options. Basically if your annual premium costs more than 8.13% of your total income you will qualify.
10-19-2017 05:00 PM
There is one other option I would suggest, but it only applies to people of certain backgrounds & lifestyles. Certain health care sharing ministries are a legal option under the ACA, the cheapest of which is Christian Healthcare Ministries. For 1 person, you can get bare-minimum coverage for $45/month. H&R Block online e-filing program automatically computes the exemption form needed for these ministries and appends it to your taxes.
Of course, there are specific belief and health conditions required to join a health sharing ministry. And, $45/month equals $540/year, which is only slightly lower than your tax penalty for no insurance. But if you're going to pay the money anyway, why not get something out of it?