Will I have to have health insurance?
The Affordable Care Act requires you to have “minimum essential” health insurance if you are a U.S. citizen or legal resident. Your dependents must also be covered. But beginning with tax year 2019, there is no longer a penalty for not being insured.
Also, exemptions are allowed for:
- Financial hardship
- Religious objections for certain faiths
- Members of Native American tribes
- Those uninsured for less than three months
- Undocumented immigrants
- Incarcerated individuals
- Those who would have to pay more than 9.83% of their 2020 income for the lowest cost workplace plan
- Those with incomes below the tax filing threshold
Will I have to pay a penalty for not having health insurance?
The penalty has been repealed beginning with tax year 2019.
What if I can’t afford health insurance?
As listed above, exemptions are provided for those with low income. Also, being covered by Medicaid counts as being covered, and Medicaid will expand to cover those under age 65 who have an income of up to 138% of the federal poverty level.
Also, people in their 20s may have the option to buy a lower-cost “catastrophic” health plan.
Finally, if your income is less than 400% of the federal poverty level, a new Premium Tax Credit will be available to help you buy insurance.
What is “minimum essential coverage”?
The Affordable Care Act requires health insurance plans to provide minimum services in 10 categories, called “essential health benefits.” While nearly everyone must obtain minimum essential coverage, each state can choose from a set of plans to serve as its benchmark plan. Whatever benefits that plan covers in the 10 categories will be deemed the essential benefits in that state. The 10 categories are:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Where can I get insurance?
Most people who have insurance at work will continue to be insured there. If your share of the premium for the insurance is more than 9.83% of your 2020 income, you’ll be able to shop for insurance in a state health insurance marketplace (also called an exchange). To find your state's marketplace, visit healthcare.gov.
What is a health insurance marketplace?
Health insurance marketplaces, or exchanges, are new organizations that have been set up for buying health insurance. They offer a choice of different health plans. Each state is expected to establish an exchange, with the federal government stepping in if a state has not set one up.
What’s the least amount of insurance I can buy?
The lowest cost plan would be the Bronze plan offered by a health insurance marketplace. Each state’s marketplace will offer the following coverage levels:
- Bronze = covers 60% of covered healthcare expenses
- Silver = covers 70%
- Gold = covers 80%
- Platinum = covers 90%
Also available if you’re under 30 is a “catastrophic” plan. Such plans must still provide minimum essential coverage, but have a lower premium because of a higher deductible and out-of-pocket costs than the other listed plans. An employer cannot use a catastrophic plan as minimum essential coverage for employees.
What is the Premium Tax Credit?
The purpose of the credit (also known as a subsidy) is to help individuals with low to moderate income buy health insurance through an Exchange. The credit is refundable, so it will increase your tax refund or help provide you one. If you don’t have the money to pay the full insurance premium up front, you may qualify to get the credit in advance, without waiting for the refund on your tax return. Such an advance payment of the credit would not come to you, it would go directly to the insurance company. The advance credit payment will be reconciled against your actual credit amount when you file your tax return. You must be enrolled in a health insurance plan through an Exchange to be considered for the credit. Note: For tax year 2020, any excess amount of advance premium tax credit payments received doesn’t have to be repaid, according to the American Rescue Plan (ARPA).
Do I qualify for the Premium Tax Credit?
The credit is available only to those who buy insurance through an Exchange and meet certain requirements:
- Your household income must be no more than 400% of the federal poverty level. For example, using the 2020 amount for a family of four (48 contiguous states and the District of Columbia), the top cutoff amount would be $104,800. See the current poverty levels
- Your part of the insurance premium must be more than 9.83% of your 2020 household income, or the employer-offered insurance must not cover more than 60% of covered healthcare costs.
What will the amount of my Premium Tax Credit be?
The actual amount you qualify for will depend on your family income and the cost of premiums in the Exchange for your area. The credit will be the difference between the cost of the Silver plan and your required contribution amount. Your contribution is limited to the following percentages of income for specific income levels:
Your Percentage of
Your Contribution (2020)
|100–133%||2.08% of income||2.06% of income|
Do I have to take the insurance my employer offers?
No, you can join your spouse’s coverage, buy coverage through an Exchange, or buy insurance on your own, directly from an insurance company or broker.
If you waive coverage for any reason other than that it costs more than 9.83% (adjusted for inflation) of your 2020 adjusted gross income or that it does not cover at least 60% of covered healthcare expenses, you can still buy coverage through an Exchange, but will not be eligible for the Premium Tax Credit.