What is the 2017 penalty for lack of health insurance?

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The 2017 Penalty for Lack of Health Insurance: What You Need to Know

If you didn't have health insurance in 2017, you may be subject to a penalty when you file your federal income tax return, unless you qualify for an exemption. The penalty, also known as theindividual shared responsibility payment, was introduced by the Affordable Care Act (ACA) to encourage people to obtain health coverage and balance the risk pool of insured and uninsured individuals. While the ACA's future is uncertain under the current administration, the penalty remains in effect for now, although it may be reduced or eliminated in the future.

How much is the penalty?

The penalty for 2017 is the greater of two amounts: a flat fee or a percentage of your household income above the tax-filing threshold. The flat fee is $695 per adult and $347.50 per child under 18, up to a maximum of $2,085 per household. The percentage is 2.5% of your household income above the tax-filing threshold, up to a maximum of the national average premium for a bronze-level health plan available on the ACA marketplace. For example, if your household income is $50,000 and the tax-filing threshold is $10,400, your penalty would be $1,245 (2.5% of $39,600, the difference between $50,000 and $10,400), which is less than the flat fee.

Who has to pay the penalty?

Most U.S. citizens and legal residents who had a gap in coverage of more than two consecutive months in 2017 may have to pay the penalty, unless they qualify for an exemption. Exemptions are available for various reasons, such as income below the tax-filing threshold, hardship, religious beliefs, and other factors. You can claim an exemption when you file your tax return using IRS Form 8965, or you can apply for an exemption in advance through the ACA marketplace. If you had coverage through an employer, Medicare, Medicaid, or other qualifying source for at least nine months of the year, you generally won't owe a penalty, although there are some exceptions.

How is the penalty enforced?

The penalty is calculated and reported on your federal income tax return for the year in which you were uninsured. If you owe a penalty, it will reduce your refund or increase your balance due. If you don't pay the penalty, the IRS can assess interest and penalties on the amount owed and may use various collection methods, such as seizing assets or garnishing wages. However, the IRS is prohibited from using liens or levies to collect the penalty.

What are the alternatives to paying the penalty?

If you don't have health insurance, paying the penalty may not be your only option. You can explore other options to obtain coverage, such as enrolling in a health plan through your employer, a private insurer, or the ACA marketplace, if you qualify for a special enrollment period. You may also be eligible for Medicaid or the Children's Health Insurance Program (CHIP), depending on your income and other factors. Additionally, you can consider alternative forms of coverage, such as short-term health insurance, health care sharing ministries, or indemnity plans, although these options may not provide the same level of benefits or consumer protections as traditional health insurance.

How can insurance help you financially?

Having health insurance can help you avoid or mitigate the financial impact of unexpected medical expenses, which can be a major source of stress and debt. Insurance can also provide access to preventive care, such as screenings and vaccinations, that can help you stay healthy and detect potential health problems early, when they are easier and less costly to treat. Moreover, insurance can offer peace of mind and protection against catastrophic events, such as accidents or serious illnesses, that could devastate your financial security. By choosing the right insurance products and coverage levels based on your needs and budget, you can manage your risks and build a more secure financial future for yourself and your loved ones.

What are some tips for choosing insurance?

When you shop for insurance, whether it's health insurance, life insurance, or other types of coverage, there are several factors to consider. First, you should assess your needs and priorities, such as your age, health status, income, family situation, and goals. Then, you should research your options, comparing the costs, benefits, and features of different policies and providers. You can also seek advice from experts, such as insurance agents, financial advisors, or consumer advocates, who can help you navigate the complex and often confusing world of insurance. Finally, you should review and update your insurance regularly, to ensure that your coverage remains adequate and affordable, and to take advantage of any new opportunities or changes in your circumstances.

What are some examples of insurance cases?

Insurance can have a significant impact on people's lives, as these examples illustrate:

- Sarah is a freelance writer who had a baby last year. She didn't have health insurance and didn't qualify for Medicaid, so she paid out of pocket for prenatal care and delivery, which cost her about $10,000. She also had to delay some of her work and lost income as a result. This year, she enrolled in a bronze-level health plan through the ACA marketplace, which costs her about $200 per month after subsidies. She likes that the plan covers preventive care and some prescription drugs, and that she won't have to worry about another unexpected bill.

- John is a 35-year-old office worker who recently got married. He has a group health plan through his employer, but he also wants to have some life insurance to protect his wife and future children. He researched several term life insurance policies and decided to buy a 20-year, $500,000 policy that costs him about $25 per month. He likes that the policy is affordable and provides a death benefit that could help his family pay off debts, cover expenses, or invest for the future.

- Maria is a retired teacher who lives on a fixed income. She has a Medicare Advantage plan that covers most of her health care expenses, but she also wants to have some long-term care insurance in case she needs to pay for nursing home or home health care. She compared several policies and decided to buy a hybrid life insurance and long-term care insurance policy that combines a death benefit with a cash value and a long-term care benefit. The policy costs her about $300 per month, but she likes that it offers multiple benefits and can help her preserve her assets and independence.