Tax Deadline Means Health Insurance Questions

If you haven’t already, you need to finish your taxes by tomorrow, April 18. For many Americans, federal income taxes are not the only thing due tomorrow; those who failed to have health insurance for the 2016-2017 plan year are also subject to pay the penalty. Though it’s been heavily debated since the new administration took office, Congress has yet to repeal portions of the Affordable Care Act, specifically the individual mandate. So unfortunately for millions of Americans, the regulations and penalties remain in force.

For those who lacked insurance for more than three consecutive months, they have more steps to complete on their taxes. Additionally, they’ll need to pay what the federal government calls the “shared responsibility payment.” Essentially, it’s a fine for not having coverage; the fine anticipates that those without insurance will eventually use the healthcare system. Therefore, the fine covers the costs that were shifted to others in the insurance pool.

Though people without insurance are subject to the penalty, they’re not necessarily responsible to pay the penalty. In some cases, people qualify for a penalty exemption. According to the IRS, nearly 23 million people claimed an exemption on their 2015 taxes. The primary exemption for which most people qualify is low income. If the cheapest insurance option costs more than 8% of their household income, then they are exempt from paying the penalty.

For 2016 taxes, the penalty is $695 per adult or 2.5% of household income. As for uninsured children, the fine is half of the amount for adults. Moreover, the total number of months uninsured also factors into the penalty costs. When it comes down to it, the fine can be as much as $2,676. This maximum is determined by the national average cost of the bronze level insurance plan on the individual market. However, most don’t pay anywhere close to the maximum. Last year, the IRS estimated that 6.5 million tax filers paid an average fine of $470.

Advanced Premium Tax Credits

Regarding those who bought insurance on the individual market and received federal aid, they also need to complete some additional steps. More importantly, those who received federal subsidies need to complete their taxes because otherwise they may lose their subsidy for 2017! Specifically, they need to complete a form that “reconciles” the amount of subsidies based on their estimated income with the amount to which they were entitled based on their actual income reported to the IRS.

In 2016, 2.4 million got additional money upon filing their taxes. On the other hand, 5.3 million taxpayers needed to pay the government back because they received to much in tax credits. As for those who underestimated their income and needed to return some of their tax credits, 62% still got a net refund on their taxes.

Since insurance is oftentimes overwhelmingly confusing, we want to shed light on this industry by answering YOUR questions.  So if you have any questions or concerns, comment below and your question may be the topic of our next video!

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