It’s great news that both Healthcare.gov and Covered California are offering a Special Enrollment Period (SEP) for individuals that are becoming aware of the individual mandate penalty for not having health insurance. Unfortunately, there will still be individuals and families that enroll during this SEP that will get hit with the IRS Shared Responsibility Payment (SRP) for 2015. The new Covered California Special Enrollment Period will begin February 23rd and run through April 30th, 2015.
More than thee months gets a penalty
Tax filers are granted an exemption from the SRP if they went without health insurance for less than three consecutive months. The Department of Health and Human Services Centers for Medicare and Medicaid (CMS) granted a special exemption during the 2014 open enrollment for individuals who were without health insurance for more than three consecutive months. The close of the 2014 open enrollment period in March meant that some individuals and families didn’t have their health insurance become effective until May 1st. The four months without health insurance triggers a penalty for at least one month.
Calculating partial year penalty
Unless CMS grants a similar exemption for 2015, people who don’t enroll until April 30th for a health insurance effective date of June 1st, will mean those households would have been without insurance for five months. The Instructions for Form 8965 Health Coverage Exemptions details how the SRP is calculated for the months when households did not have health insurance without an exemption. While the SRP for two months without health insurance is far less than the total penalty for the entire year, reading the instructions and crunching the numbers is more agonizing than writing the check for the penalty.
SEP only for exchange plan for now
The Special Enrollment Period based on lack of understanding about the individual mandate penalty only applies to Marketplace exchange plans at this time. Health insurance companies and health plans do not have to provide the same or similar special enrollment period if they don’t want to. However, some private health insurance plans may offer the SEP in the coming weeks. But those plans, purchased directly from the company will not have any tax credits to reduce the monthly premium.
Covered California SEP news release
Feb. 20, 2015
COVERED CALIFORNIA OFFERS CONSUMERS A CHANCE TO MINIMIZE THEIR TAX PENALTY BY ENROLLING IN A HEALTH INSURANCE PLAN
New Category Created for Special Enrollment Allows Those Unaware of a Tax Penalty for Being Uninsured to Sign up for Coverage by April 30
SACRAMENTO, Calif. — Covered California is offering a special enrollment opportunity for consumers who did not know or understand there was a tax penalty for being uninsured in 2014 or who learned they may face a penalty for 2015.
“For the first time, health care and taxes now are linked arm in arm,” Covered California Executive Director Peter V. Lee said. “The law requires everyone to be insured, and if you’re not, you may face a significant financial penalty when you file your taxes this year.”
From Feb. 23 until April 30, 2015, consumers are eligible to apply for health coverage during special enrollment by attesting that they did not realize there was a tax penalty. To attest to this fact, they can select “Informed of Tax Penalty Risk” when filling out an application at CoveredCA.com.
The new tax penalty for being uninsured — known as the “shared responsibility payment” — motivated many consumers to purchase insurance this year during the Nov. 15-Feb. 15 open-enrollment period via Covered California. Unfortunately, many people who are supposed to purchase insurance may be unaware of the penalty and surprised when they go to their tax preparation professional for help.
“We don’t want anyone to feel blindsided by the shared responsibility payment,” Lee said. “That’s why we are establishing this limited-time special-enrollment that builds on the broader availability of coverage for Californians who have a change of circumstance making them eligible outside of open enrollment. If you didn’t realize the tax consequences of not having insurance, you can enroll in a Covered California plan starting on Monday, Feb. 23 until April 30.”
The tax penalty aside, Californians who have a life-changing event — for example, having a baby, getting married, losing their health care coverage because they have changed jobs or moving to another area — can qualify for a special-enrollment period through Covered California. They can sign up for coverage as long as they do so within 60 days of the qualifying life event.
For the first time, consumers who are filing their taxes this year may be paying a penalty for not having health insurance. And the penalty for going without insurance in 2015 will go up significantly: Those who can afford insurance but choose not to buy it will be subject to paying $325 per adult in a household or 2 percent of their income, whichever is greater.
What does that mean in real-world terms for people filing their taxes right now? According to the Internal Revenue Service:
- A single person earning $40,000 a year will pay a penalty of nearly $300 for being uninsured in 2014.
- A family of four earning $70,000 a year will pay nearly $500 for being uninsured in 2014.
Those penalties increase for consumers without insurance this year.
- That same individual making $40,000 will see their penalty jump from almost $300 to nearly $600.
- That family of four will see its bill jump from nearly $500 to almost $1,000.
“That’s $1,000 for not having health insurance,” Lee said. “That’s $1,000 that could be used to provide protection and security to their family and give them the peace of mind they deserve. Because of the subsidies available, many people will find it actually costs less to buy insurance than to pay the penalty.”
During the final weeks of open enrollment, Covered California served consumers who literally went straight from their tax adviser to a certified enroller after learning they would lose hundreds of dollars because they were uninsured in 2014.
“We know this will continue throughout the upcoming weeks as more and more people do their taxes and discover how this new era of health care works,” Lee said. “We don’t want there to be any surprises, and we want to make sure that everyone who is eligible gets covered.”
As of Monday, Feb. 23, consumers may enroll at CoveredCA.com and can find the nearest Certified Enrollment Counselor or Certified Insurance Agent to help them enroll. Consumers also can call the Covered California Service Center, at (800) 300-1506, where a representative will help them. To get across the finish line for open enrollment, with coverage effective on March 1, however, consumers cannot enroll without the help of an agent, a counselor or Covered California’s Service Center.
“We encourage everyone to research their options through Covered California to see what health care coverage options are available to them,” Lee said.
P.S. Kevin Knauss is a Certified Insurance Agent and I can enroll individuals and families during this SEP. Peter Lee just forgot to mention my name in his press release.