Obamacare: Does It Pay to Wait Until You Need It To Get Coverage?

Find out why it doesn't make sense to wait until you're sick to get health insurance.

The Affordable Care Act (popularly known as Obamacare) requires that all Americans obtain minimally adequate health insurance coverage. Unless they are exempt, those who fail to obtain such coverage are required to pay a penalty to the IRS, as follows:

  • for 2015, the greater of $325 or 2% of income
  • for 2016, the greater of $695 or 2.5% of income, and
  • the $695 amount is indexed for inflation after 2016.

The penalty is prorated if you had coverage for part of the year and is subject to an annual cap. For more details on calculating the penalty, see the IRS Individual Shared Responsibility Provision – Reporting and Calculating the Payment page.

However, the penalty only applies to taxpayers who can afford insurance but do not purchase it. You’re exempt from the penalty if it would cost more than 8% of your household income, and there are several other exemptions as well. For details, see the HealthCare.gov website.

If you’re not exempt, the tax penalty you’ll have to pay if you don’t obtain health insurance may be smaller than the cost of obtaining coverage. So why not just go without coverage until you need it? After all, Obamacare prohibits insurers from denying coverage due to preexisting conditions. This means you can wait until you get sick to obtain coverage. Indeed, theoretically, you could wait to apply until you’re in an ambulance on the way to the hospital. Right?

Wrong! You can apply for individual health coverage only during annual open enrollment periods. This is true whether you obtain coverage through your state health exchange or you bypass the exchange and purchase coverage directly from an insurer. Ordinarily, the open enrollment period lasts from November 1 through January 31 of the following year. Thus, the open enrollment period to obtain coverage for 2016 lasted From November 1, 2015 through January 31, 2016. After the open enrollment period ends you won’t be able to obtain health insurance coverage unless you have a qualifying life event that qualifies you for a special enrollment period--—for example, you move, lose your health insurance, get married or divorced, or have a baby. You can also get Obamacare coverage anytime you qualify for Medicaid in your state. For details, see the online questionnaire at the HealthCare.gov website.

This means that, unless you happen to get sick during an open enrollment period or have a qualifying life event, it could be impossible for you to obtain coverage as an individual at any other time of the year. Without health insurance, even a minor sickness or injury can cost you a fortune. A recent report by The New York Times found that it can cost more than $1,000 to have a cut finger fixed in a hospital emergency room.

The moral of the story is simple: Don’t wait to get covered. Do it during the open enrollment period. If the period is over, apply the moment you have a qualifying life event.

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How It Works

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  3. Choose attorneys to contact you