Home / Politics / Obamacare Penalty Fees – Who Pays and How Much? [FACT SHEET]

Obamacare Penalty Fees – Who Pays and How Much? [FACT SHEET]

obamacare penalty fees healthcareOriginally posted on Septebmer 25, 2013 3:30 EDT

ForexTV (New York) by Timothy Kelly

As the October 1, 2013 “open enrollment” date approaches, many Americans will begin the task of exploring their healthcare insurance options under the Affordable Healthcare Act (ACA) or Obamacare. Those who do not comply are subject to penalty fees called the “shared Responsibility Payment”. For individuals, the deadline to comply with the new tax law (ACA was classified as a tax the Supreme Court of the United States) is January 1, 2014.

Unless otherwise exempted, citizens (excluding members of Congress) will be required by the ACA to carry health insurance. Non-compliance with ACA will result in a penalty to the individual or a fee known as the Individual shared Responsibility Payment. Penalty fees will be collected through the IRS on an individual’s tax return. The amount of the penalties, according to the tax law are a s follows:

*The [penalty]fee in 2014 is 1% of your yearly income of $95 per person for the year, whichever is higher. the fee increases every year. In 2016 it is 2.5% of income of $695 per person, whichever is higher.
In 2014 the payment for uninsured children is$47.50 per child. The most a family would have to pay in 2014 is $285. You make the payment when you file your 2014 taxes, which are due in April 2015. 

In addition to the penalty fee, the offending individual will have to pay %100 of all costs of their health care. However, the Open Enrollment period extends until March 31, 2014. After the open enrollment period ends, individuals won’t be able to get coverage through the Marketplace until the next annual enrollment period, unless they qualify for an exemption or extension. Penalty fees for 2014 will be due and payable with your Federal tax return by April 15, 2015.

Minimum Essential Coverage Threshold

To avoid the ACA penalty fee, individuals must be able to prove that they have a minimum amount of health coverage. This is defined by the ACA as:

The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage.

These include:

Any Marketplace plan, or any individual insurance plan you already have
Any employer plan (including COBRA), with or without “grandfathered” status. This
includes retiree plans.
 The Chidrens’ Health Insurance Program (CHIP)

TRICARE (for current service members and military retirees, their families, and survivors)
Veterans health care programs (including the Veterans Health Care Program, VA Civilian Health and Medical Program (CHAMPVA), and Spina Bifida Health Care Benefits Program)
Peace Corps Volunteer plans
Notable exceptions to the definition of Minimum Essential Coverage include: only for vision or dental care, workers’ compensation, coverage for specific diseases or conditions, and medical discount only plans.

Exemptions from the payment
The AHA provides exemptions for certain individuals who qualify.  Individuals must apply and receive approval for an exemption.   If granted the individual will not have to pay the penalty fee.  This is called an “exemption.”
According to the AHA you may qualify for an exemption if:
You’re uninsured for less than 3 months of the year
The lowest-priced coverage available to you would cost more than 8% of your household income
You don’t have to file a tax return because your income is too low (Learn about the filing limit.)
You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
You’re a member of a recognized health care sharing ministry
You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
You’re incarcerated, and not awaiting the disposition of charges against you
You’re not lawfully present in the U.S.


Hardship exemptions
In addition, the law allows for other exemptions such as hardships.  The AHA defines 12 conditions for “hardship exemptions”.   Individuals who can prove the circumstances of “hardship” (defined below) that affect their ability to purchase health insurance coverage, may qualify for a “hardship” exemption:
1.You were homeless.
2.You were evicted in the past 6 months or were facing eviction or foreclosure.
3.You received a shut-off notice from a utility company.
4.You recently experienced domestic violence.
5.You recently experienced the death of a close family member.
6.You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
7.You filed for bankruptcy in the last 6 months.
8.You had medical expenses you couldn’t pay in the last 24 months.
9.You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
10.You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you do not have the pay the penalty for the child.
11.As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.
12.You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.

Application For Exemption
Individuals applying for exemption due to: coverage being unaffordable; membership in a health care sharing ministry; membership in a federally-recognized tribe; or being incarcerated:
There are two basic way to file:
1. You can claim these exemptions when you fill out your 2014 federal tax return, which is due in April 2015′

1. You can apply for the exemptions in the Health Insurance Marketplace
If an exemption is granted on the ground of an individual’s financial hardship (income too low)you may also qualify to buy catastrophic coverage through the Marketplace.
If you’re applying for an exemption based on: membership in a recognized religious sect whose members object to insurance; eligibility for services through an Indian health care provider; or one of the hardships described above:
You fill out an exemption application in the Marketplace
If your income will be low enough that you will not be required to file taxes:
You don’t need to apply for an exemption. This is true even if you file a return in order to get a refund of money withheld from your paycheck. You won’t have to make the shared responsibility payment.
If you have a gap in coverage of less than 3 months, or you are not lawfully present in the U.S.:
You don’t need to apply for an exemption. This will be handled when you file your taxes.


About Timothy Kelly

Mr. Kelly is the Founder of ForexTV. Mr. Kelly is a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. Mr. Kelly is also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State. In addition to writing about the financial markets, Mr. Kelly writes commentary on Politics and Social issues. He is also an occasional contributor to the Technology and Science sections of the Web site. Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Sienna, Italy where he studied studio art. Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he has been a coach of Youth Lacrosse for over 10 years, Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York. Prior to creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.