I didn’t know I was eligible for Medicaid this year, so I didn’t enroll. Will I have to pay a penalty?

Q. I didn’t know that I was eligible for Medicaid, so I’ve been uninsured the whole year. I’ve enrolled in Medicaid for the new year, but am I going to have to pay a penalty for not enrolling last year?

A. Most likely, no.

There are numerous exemptions from the individual mandate penalty, and at least one of them probably applies in your case.

ACA open enrollment guide

Learn more about ACA’s individual mandate and its penalties in our ebook, The Insider’s Guide to Obamacare’s Open Enrollment.

The two that are most likely to help you are:

  • The exemption for people whose income is under the tax filing threshold. (for the 2017 tax year, this is $10,400 for a single individual, and $20,800 for a married couple filing jointly.)
  • The exemption for people who do not have access to coverage that is considered affordable under the Affordable Care Act.

For the second exemption, there are two tests to determine whether the coverage available to you is considered affordable. The first considers whether or not you have access to an employer-sponsored plan that would cost you less than 9.69 percent of your household income in 2017. (This has decreased slightly to 9.56 percent for 2018.)

If you don’t, the second test is to see whether the lowest-cost metal-level plan in the exchange in 2017 would have been more than 8.16 percent (8.05 percent in 2018) of your household income (this provision used to be based on the lowest-cost bronze plan, but the IRS broadened the guidelines in 2017, to account for areas of the country where bronze plans are not available).

Since you qualified for Medicaid, you would not have qualified for premium subsidies. That means the affordability test for the lowest-cost plan in the exchange would have been based on the full cost of the plan. The IRS reported that for 2017, the national average cost of a bronze plan was $272/month. That’s averaged across all enrollees, so the price would be lower for younger enrollees and higher for older enrollees. And it’s not necessarily indicative of the lowest-cost metal-level plan in each area. But if we look at the average premium, it would be $3,264 in total premiums for the year.

For that to be no more than 8.16 percent of your income in 2017, you’d have needed to earn at least $40,000 for the year. As a single individual eligible for Medicaid, your income was under $16,642 in 2017 – clearly well below the amount you’d have needed to earn to make a $272/month premium be considered affordable. It’s important to note that the lowest-cost metal plan available to you would likely have been considerably less than $272/month if you’re in your 20s or 30s, although for it to be less than 8.16 percent of your Medicaid-eligible income (ie, income that didn’t exceed $16,642), the premium would have to have been no more than $113/month (if you’re in a Healthcare.gov state, they have a tool you can use to determine whether you’re eligible for an affordability exemption).

The fact that you were eligible for Medicaid is not factored into the tests for the affordability exemption. Assuming you weren’t eligible to enroll in an affordable employer-sponsored plan, and assuming the lowest-cost Bronze plan in your exchange would have been more than 8.16 percent of your income (which was almost certainly the case), you’re exempt from the penalty.

If your income is low enough that you don’t have to file a tax return, you don’t have to do anything to get your exemption – it’s automatic. If you qualify for the affordability exemption, you can claim it when you file your taxes, or you can fill out an exemption form to obtain it.

[NOTE: The individual mandate penalty is still in effect, and will continue to be in effect throughout 2018. The GOP tax bill that was signed into law in December 2017 will eventually repeal the individual mandate penalty, but not until 2019. So the penalty will be assessed on people who are uninsured in 2018, when they file their taxes in early 2019. People who are eligible for an exemption from the penalty still need to claim it for 2017 and 2018, but exemptions will no longer be necessary starting in 2019.]