Obamacare 101: What to know if you opt out of buying health insurance

The insurance "exchanges" set up under the Affordable Care Act, where people can shop online for health insurance, went live on Oct. 1, and an estimated 48 million uninsured Americans can use them to try to find an affordable plan. The 2010 Obamacare law requires that people have health insurance, or that they pay a fee starting next year if they choose to opt out.  

Here are the ins and outs of forgoing health insurance. 

If you don't have health insurance, and aren't sure if you want to purchase a plan, how long do you have to decide?

You can sign up for health coverage on an exchange anytime between now and March 1, 2014. Your coverage would begin Jan. 1, 2014, at the earliest. If you do not enroll in that window, you will not be able to get health coverage through the insurance exchange marketplace until the next annual enrollment period unless there are extenuating circumstances. 

How much are the penalties for not buying a health plan?

The penalties are not very high to begin with. In 2014, the fine to remain uninsured is $95 per person (up to a family maximum of $285, or 1 percent of family income, whichever is greater).

But the penalty will increase more than sevenfold in the next two years, with the fine running as much as $695 per person by 2016. The family maximum would be as high as $2,085 (or 2.5 percent of family income, whichever is greater).

What kind of insurance policy prevents someone from having to pay the penalty?

In short, any plan that qualifies as "minimum essential coverage." This includes plans offered on the marketplace exchange, a plan provided by your employer, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), TRICARE, Veterans Healthcare programs, Peace Corps Volunteer plans, and possibly others. For a full list with more details, refer to Healthcare.gov.   

What plans don’t qualify?

You'd have to pay the fee if you have only vision or dental coverage or only workers' compensation, coverage only for specific health conditions, or a plan that offers only discounts on medical services.

Would it be cheaper to buy an insurance plan, and elect to not use it, rather than pay the fee?

It depends, but as of now it is probably cheaper to pay the fine, provided you do not use any health-care services. You can calculate how much your health insurance premium would cost by using the Kaiser Family Foundation Subsidy Calculator, and then you can compare the cost to the penalty you would be assessed for having no insurance. The subsidy calculator takes into account your region, household income, employer coverage, number of family members, and tobacco use.

Why is there a penalty?

The penalty is meant to offset the costs of urgent medical care for individuals who do not have health insurance, according to Healthcare.gov. The website also warns that people without health coverage will have to pay the entire costs of all their medical care.

How does someone apply for an exemption from health insurance so that they don't have to pay the penalty?

You can claim exemptions on your 2014 federal tax return, or you can apply for exemptions on the Health Insurance Marketplace exchanges. (The application is not currently available). Healthcare.gov will provide up-to-date information about how to apply for an exemption. 

Who is eligible for such exemptions?

You can be exempted from the requirement to buy health insurance – and hence, from the penalty – if you meet one of the following requirements:

•You are uninsured for less than three months of the year.

•You live illegally in the United States.

•You’re incarcerated, and not awaiting disposition.

•You’re a member of a recognized Indian tribe.

•Your income is officially deemed too low.

•The lowest-priced converge would cost more than 8 percent of your household income.

•You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare.

•You’re a member of a recognized health-sharing ministry. (Note: Christian Scientists do not currently qualify for the exemption.) 

Healthcare.gov also provides a list of hardship exemptions that qualify an individual for exemption.

This flow chart from the Kaiser Family Foundation might help you determine if you need to buy health insurance.  

Massachusetts has granted a religious exemption to its requirement to buy health insurance. Is this exemption still valid?  

No. The new federal requirement overrides state provisions, which means that any exemptions not listed under the Affordable Care Act are not included. 

If you are not exempt, how will the penalty be assessed?

You will be required to provide information regarding health insurance when you file your 2014 federal income taxes. For those who elect not to buy health coverage, the penalty will probably be assessed on the form or withdrawn from your tax refund.

Other articles in the Monitor's Obamacare 101 series:

• What happens starting Oct. 1?

• What to know if you already have health insurance

• How the federal subsidy works

• What owners of small businesses need to know

• When will the enrollment glitches be fixed?

• What college students need to know

• Seven ways you can sign up, despite Web woes

• Enroll by March 31 to avoid penalty, White House clarifies