Q. If I decide to say “No!” to Obamacare and buy my coverage in the non-exchange market – do I have to pay a penalty if the benefits don’t meet Obamacare’s standards?
A. If the plan you purchase is not ACA-compliant, you would be subject to a penalty when you file your taxes. But just to clarify – the entire individual health insurance market is subject to the ACA’s requirements, including plans sold outside the exchanges.
The only non-compliant plans that have been available for purchase since January 1, 2014 are things like discount plans, critical illness plans (eg, a cancer-only policy), accident supplements, and short-term health policies. These plans are generally intended to supplement your health insurance policy rather than serve as stand-alone coverage [short-term policies work as stand-alone coverage, but only to fill a short gap between other policies.
Although you would be subject to a penalty if you rely on this temporary health coverage, they’re one of the only options available outside of open enrollment for people who don’t have a qualifying event; otherwise, the open enrollment window applies to all regular health insurance plans, including those sold outside the exchange].
So if you were to purchase something like a discount plan or critical illness policy as your only source of coverage, you’d be subject to a penalty. But you can buy regular health insurance outside of the exchange with no penalty.
If you’re eligible for premium subsidies, you’ll want to purchase your plan in the exchange, as subsidies are not available for off-exchange plans (even if the carrier is selling the exact same plan in the exchange). But if not, you can buy your plan directly through the carrier if you prefer that. Either way, all of the plans for sale have been ACA-compliant since January 1, 2014, other than the aforementioned unregulated plans.
If you’ve already got coverage that predates March 23, 2010, it’s grandfathered and you can keep it without penalty as long as the carrier continues to offer it without significant changes. If you purchased your current plan after that date but prior to 2014 and your carrier has continued to renew the plan, it’s grandmothered and you can keep it without penalty for as long as it’s offered by your carrier (the latest possible date those plans can remain effective is September 30, 2017). Neither grandmothered nor grandfathered plans are fully ACA-compliant, but people with those plans are not subject to a penalty.
However, if you purchase a new policy after January 1, 2014, it must be fully ACA-compliant. The good news is that all major medical plans sold since then have been ACA-compliant, regardless of whether they’re sold in the exchange or not.