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What happens if I buy insurance but it doesn’t meet ACA’s minimum essential benefits standards?

  • By
  • contributor
  • August 20, 2013

Q. What happens if I buy insurance but it doesn’t meet the ACA’s minimum essential benefits standards?

A. Beginning in January 2014, nearly everyone will have to have health insurance that meets the minimum essential benefits standards. With a few exceptions, people who don’t will have to pay a penalty when they file their income taxes.

The penalty (for being uninsured or for having coverage that does not meet minimum essential benefits standards) starts at 1% of household income or $95 per adult (whichever is greater) in 2014, and increases to 2.5% of income or $695 per adult in 2016. The fee for children is half the amount for adults. For 2014, the maximum penalty that a family would incur is $285.

But it’s unlikely that you’ll be purchasing a plan that doesn’t meet the standards. Individual plans both in and out of the exchanges will have essential benefits coverage, as will employer plans.

If you buy your own health insurance, your carrier may have offered to let you keep your existing plan until it renews in 2014. It’s possible that your current plan does not meet the minimum essential benefits requirements, but the coverage requirement and penalty only kick in once your plan renews in 2014. So as long as you switch to an ACA-compliant plan at that time, you won’t be subject to a penalty.

Plans that don’t meet the minimum essential benefits requirements include workers’ compensation (that only covers you at work), specific disease policies (for example, a plan that only covers cancer), stand-alone dental or vision plans, and discount medical plans. When you buy health insurance, be sure you understand what your policy covers. Purchase a policy in your state’s exchange or from a reputable broker – you’ll have reliable coverage and you also won’t have to worry about paying a penalty when you file your taxes.