By now, all Americans know the law: You have to carry health insurance coverage, or face penalties when you pay your federal tax bill. Designed to prevent individuals from facing serious financial hardships due to skyrocketing medical costs, the Affordable Care Act (better known as Obamacare), has its share of supporters and detractors, but the fact remains: You must have health insurance.
Still, despite the law’s main purpose of improving access to health care, many people find that paying the premiums for health insurance is a challenge. Even those who are covered by their employers are finding that premiums are increasing, sometime to levels that they simply can’t afford. And while the majority of Americans who must purchase coverage on the Exchange receive assistance in the form of tax credits, the monthly premiums, plus deductibles and co-payments, force them to make some tough choices. For some, even the least expensive plans cost too much, and the only option is to go without.
The tax penalty for not having coverage increases every year. In fact, the penalties are designed to equal the premium on the least expensive health insurance plans, as an incentive for individuals to purchase coverage. That being said, if you truly cannot afford health insurance coverage, you do have some options.
You Can’t Pay Your Bill — Now What?
If you purchased your health insurance on the Exchange and received assistance from the government — like nearly 90 percent of people do — and can’t make your monthly payments, your policy won’t be canceled immediately. Health insurers offer a 90-day grace period for missed payments. How far behind you are on your payments affects your claim status, though.
If you are 30 days behind, you won’t see any difference in how your claims are handled. From days 31 through 60, your claims might be delayed until you get caught up. After 60 days, insurers are required to inform your providers that you are behind on your premiums; your doctors may refuse to accept your insurance at that time and you will have to pay out of pocket.
So what does this mean for you? If you are short on cash and can’t make your payments on time one month, don’t panic. Notify your insurance carrier and make a plan to catch up. If you simply cannot make your payments at all, and your hardship is ongoing, you may be able to take advantage of other options. Keep in mind, that the 90-day grace period only applies if you receive a subsidy from the government; if you don’t qualify, your policy will be canceled after 30 days of delinquency and you’ll be responsible for all claims at that point.
Life can be unpredictable, and there may be times when you can’t pay all of your bills. If you experience certain qualifying events, you may be able to change your policy to a less expensive one. Qualifying events include moving new state, getting married or divorced, having or adopting a child, and turning 26, among others. Generally speaking, losing your coverage due to non-payment is not a qualifying event, so if your policy is canceled due to non-payment of premiums, you cannot simply pick up a less expensive policy. You will have to wait until the next open enrollment period.
However, you may qualify for a hardship exemption if you cannot pay your bills. If you do not qualify for a subsidy because you earn too much money each year, but the cost of the least expensive plan in your state costs more than 8 percent of your annual income, you may be granted a “hardship waiver” that exempts you from purchasing coverage.
Certain other events may also qualify you for a waiver. Being homeless, receiving a shutoff notice from a utility company (or having your utilities turned off), taking care of a sick or elderly spouse or family member, and not being able to purchase food or clothing are some of the circumstances in which you can apply for a waiver.
Waivers may be temporary; i.e., if you can’t afford your utilities for only a month or two, you’ll only have a waiver from insurance during that time and will have to pay a penalty for the rest of the year that you went without coverage. However, if you can technically afford coverage, but the real numbers don’t add up, an exemption or waiver, even temporary, can give you some breathing room while you determine your next steps.
In many cases, if you qualify for a hardship exemption, you may qualify for a state Medicaid program, so don’t hesitate to explore those options as well. If that doesn’t pan out, rest assured that you can usually locate another option that won’t result in a huge fine come tax time.