What happens if I don’t buy ACA-compliant health insurance?

Q. What happens if I don’t buy ACA-compliant health insurance?

A. The Affordable Care Act includes an individual mandate, requiring every American to have minimum essential coverage, although there are some exceptions. The individual mandate includes a penalty for anyone who does not buy health insurance. Although the GOP tax bill (H.R.1) that was enacted in December 2017 does eventually repeal the individual mandate penalty, that repeal won’t take effect until 2019. People who are uninsured in 2018 will still face a penalty if they aren’t eligible for an exemption.

It’s important to understand that minimum essential coverage does not necessarily have to be compliant with the ACA. Grandmothered and grandfathered health plans are not fully ACA-compliant, and yet they count as minimum essential coverage. So if you have a major medical plan that pre-dates the ACA, you’re in compliance with the ACA’s individual mandate, despite having coverage that’s not ACA-compliant. But you may find out that your coverage isn’t as robust as the available ACA-compliant plans, since pre-ACA plans don’t have to cover essential health benefits.

But if you buy coverage that’s NOT considered minimum essential coverage, you’ll not only have substandard coverage, you’ll also be on the hook for the ACA’s individual mandate penalty. Plans that aren’t minimum essential coverage include short-term insurance, travel insurance, accident supplements, limited benefit plans, fixed indemnity plans, and other supplemental or limited coverages.

How much is the penalty?

For 2018, the penalty is $695 per uninsured adult (family cap of $2,085) OR 2.5 percent of household income, whichever is greater.

This penalty amount for 2018 is unchanged from 2016 and 2017. The flat-rate penalty was indexed for inflation starting in 2017, but the inflation adjustment was $0 for both 2017 and 2018 — and the penalty will no longer apply when people are uninsured in 2019.

You can use our penalty calculator to determine penalty amounts for 2017 and 2018, depending on your specific circumstances.

Penalty exemptions

There are some exceptions to the penalty though. You don’t have to pay if:

  • you can’t purchase a qualified plan through your state health insurance exchange for less than 8.05 percent of your adjusted gross income in 2018 (this is calculated after any applicable premium subsidies are applied, so the exemption is generally only available to people who aren’t eligible for premium subsidies);
  • your income is below the tax filing threshold;
  • you have a hardship waiver;
  • you are not covered for a period of less than three months during the year (if you’re uninsured for three months or longer, a penalty applies to the full length of the time you were uninsured);
  • you have a religious objection;
  • you’re a member of a health care sharing ministry;
  • you’re a member of an Indian Tribe;
  • you’re incarcerated; or
  • you’re not legally present in the U.S.

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Related terms

individual mandate

short-term health insurance

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