What today’s Supreme Court ruling on ACA means for consumers, insurers and states

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The Supreme Court upheld the Affordable Care Act today in a 7-2 ruling. The court dismissed a challenge to the law, noting that the states and individuals who were trying to overturn the ACA did not have standing.

This is the third time the ACA has survived challenges in the Supreme Court. In 2012, the ruling was 5-4, and in 2015, the ruling was 6-3. These cases have all had varying arguments and merits, but it’s noteworthy that although the court has become more conservative over the last decade, the justices have increasingly favored the ACA.

In this year’s case, some legal analysts had speculated that the court might overturn the ACA’s individual mandate but allow it to be severed from the rest of the ACA. That approach would have upheld the ACA as well, but the court simply dismissed the whole case. (This thread from Nicholas Bagley is a great summary, if you’re interested in the specifics.) So nothing has changed: The ACA remains intact, and the general consensus is that it’s here to stay.

Is this decision the end of legal challenges to the ACA?

That doesn’t mean the Affordable Care Act won’t continue to face legal challenges — a case that’s currently under consideration in Texas takes aim at the ACA’s requirement that health plans fully cover the cost of certain preventive care. But that case does not seek to overturn the ACA itself, and it appears unlikely that the Supreme Court would take up any other case that might aim to do so.

What does this decision mean for consumers?

There was a collective sigh of relief this morning among people who are enrolled in Medicaid under the ACA’s expanded eligibility guidelines, as well as those who purchase their own individual/family health insurance and rely on the ACA’s premium tax credits, cost-sharing reductions, guaranteed-issue rules and coverage for pre-existing conditions, and essential health benefits.

According to a recent analysis by Charles Gaba, more than 10% of all Americans are covered under Medicaid expansion, ACA-compliant individual/family health plans, and Basic Health Programs, all of which stem directly from the ACA.

As we’ve explained during prior legal and legislative challenges to the ACA, the law provides a vast array of additional consumer protections that extend to most Americans in one way or another. But the people who are most likely to feel a sense of relief today are those enrolled in coverage that either wouldn’t exist or wouldn’t be accessible to them without the ACA. The anxiety about losing health coverage is no longer hanging over these Americans.

Premium subsidies will continue to be available, and the subsidy enhancements provided by the American Rescue Plan will continue to be in effect throughout 2022 – and possibly longer, if Congress acts to extend them.

If you’ve been on the fence about enrolling in individual/family coverage during the special enrollment period that’s currently ongoing in nearly every state, you can now enroll with confidence. And the same is true about signing up for 2022 coverage when open enrollment starts in November.

And although today’s ruling was on a lawsuit that hinged around the individual mandate and penalty, nothing has changed about the ACA’s requirement that most people maintain health insurance: There continues to be no federal penalty for not having health insurance, as has been the case since 2019. (If you’re in California, Massachusetts, New Jersey, Rhode Island, or the District of Columbia, there’s still a penalty for going without health insurance.)

What does the decision mean for health insurers?

Insurers that offer individual/family health insurance have been displaying increasing confidence in the ACA for the last few years. After fleeing the marketplaces/exchanges in 2017 and 2018, insurers started to join or rejoin the marketplaces in 2019. That trend continued in 2020 and 2021, and we’re already seeing more insurer participation in the initial 2022 rate proposals that have been submitted by insurers in several states.

The case that the Supreme Court dismissed today was initially filed in early 2018, so the legal threat to the ACA has been in the background throughout those three years of increasing insurer participation in the ACA-compliant insurance market.

Although insurance companies — and the actuaries who set premiums — tend to be quite averse to uncertainty, the individual market has proven to be profitable for insurers in recent years (after being unprofitable in the early years of ACA implementation). Insurers’ increasing willingness to offer plans in the marketplace is testament to that, despite the uncertainty that the lawsuit created over the last few years. Now that there’s no longer a pending legal threat to the ACA, we might see even more insurers opting to join the marketplaces or expand their existing coverage areas.

What does the decision mean for states?

Although many states have enacted laws designed to protect consumers in case the ACA had been overturned, there’s no getting around the fact that they rely heavily on federal funding that’s provided under the ACA. Without that funding, most states would not have been able to maintain the ACA’s Medicaid expansion or affordability provisions for self-purchased health insurance.

There’s no longer a threat to the funding, which might make states more likely to push forward with additional consumer protections tied to the ACA. Among the most obvious is Medicaid expansion in the 13 states that have not yet accepted federal funding to expand Medicaid eligibility under the ACA.

The American Rescue Plan provides two years of additional federal funding to states that newly expand Medicaid. So far, Oklahoma is the only state making use of that provision, and the state had already planned to expand Medicaid this year as a result of a ballot measure that Oklahoma voters passed last year.

To be fair, the other 13 states have rejected Medicaid expansion year after year, including during the 2020 and 2021 legislative sessions that took place during a global pandemic. Without a change to the makeup of their legislatures, most are likely to continue to do so. But now that the Supreme Court has upheld the ACA yet again, states that newly expand Medicaid can do so without a lingering worry that the federal funding might be eliminated.

It’s also possible that more states might consider reinsurance programs that make use of the ACA’s 1332 waiver provisions. But that would also depend on whether the American Rescue Plan’s subsidy enhancements are extended beyond 2022. Reinsurance programs make coverage more affordable for people who don’t receive premium subsidies. Before the ARP eliminated the “subsidy cliff” for 2021 and 2022, the lack of affordability for households earning a little more than 400% of the poverty level was a very real problem.

But that’s not currently an issue, as those households qualify for subsidies if the benchmark plan would otherwise cost them more than 8.5% of their income. If Congress extends that provision, reinsurance programs would help very few enrollees (and they can also harm subsidized enrollees in some areas, since they reduce the size of premium subsidies). State legislatures will need to keep an eye on how this plays out at the federal level, but without an extension of the ARP’s subsidy structure, we can expect to see more states pursuing 1332 waivers for reinsurance programs in the next few years.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Will you owe a penalty under Obamacare?

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Key takeaways

No longer a federal penalty, but some states impose a penalty on residents who are uninsured

Although there is no longer an individual mandate penalty – or “Obamacare penalty” – at the federal level, some states have implemented their own individual mandates and associated penalties:

  • Massachusetts implemented an individual mandate in 2006, and it’s remained in effect ever since. The state has not double-penalized people while the federal mandate penalty was in effect, but starting in 2019, the state once again began assessing penalties on people who are uninsured and not exempt. The penalty in Massachusetts is calculated as 50 percent of the cost of the lowest-cost plan that the person could have purchased. There’s no penalty if your income is up to 150 percent of the poverty level. If your income is between 150.1 and 300 percent of the poverty level, your penalty is 50 percent of the premium for the lowest-cost ConnectorCare plan, and if your income is over 300 percent of the poverty level, your penalty is 50 percent of the cost of the lowest-cost bronze plan available through the Massachusetts Health Connector. Revenue generated from the penalty is used to help cover the cost of ConnectorCare coverage for people with income under 300 percent of the poverty level.
  • New Jersey has implemented an individual mandate, effective in 2019, with a penalty modeled on the ACA’s penalty. The maximum penalty is based on the average cost of a bronze plan in New Jersey. Revenue generated from the penalty is used to fund the state’s new reinsurance program.
  • The City Council in the District of Columbia approved an individual mandate, with a penalty modeled on the ACA’s penalty. The measure was signed into law by Mayor Muriel Bowser in September 2018, and took effect in January 2019. The maximum penalty is based on the average cost of a bronze plan in DC. Revenue from the penalty is used for outreach and enrollment assistance, as well as programs that improve the availability and affordability of coverage in the District.
  • California has an individual mandate as of 2020, with a penalty modeled on the ACA’s penalty. Revenue from the state’s individual mandate is used to help cover the cost of the state’s new premium subsidies, which extend to higher income levels than the ACA’s premium subsidies.
  • Rhode Island has an individual mandate as of 2020, with a penalty modeled on the ACA’s penalty. Revenue collected via the penalty is used to fund the state’s new reinsurance program.

Vermont enacted legislation to create an individual mandate as of 2020, but lawmakers failed to agree on a penalty for non-compliance, so although the mandate took effect in 2020, it has thus far been essentially toothless (the same as the federal individual mandate, which remains in effect but has no penalty for non-compliance). Vermont could impose a penalty during a future legislative session, but the most recent legislation the state has enacted (H.524/Act63, in June 2019) calls for the state to use the individual mandate information that tax filers report on their tax returns to identify uninsured residents and “provide targeted outreach” to help them obtain affordable health coverage.

2014-2018: Everything you need to know about the federal individual mandate penalty

Although the ACA included provisions to make it easier to buy health insurance – including Medicaid expansion, premium subsidies, and guaranteed-issue coverage – it also included an individual mandate that requires Americans to purchase health coverage or face a tax penalty, unless they were eligible for an exemption).

But the GOP tax bill that was signed into law in late 2017 repealed the individual mandate penalty, starting in 2019 (See Part VIII, Section 11081 of the text of the Tax Cuts and Jobs Act). Although the law was enacted in 2017, there was a delay of more than a year before the Obamacare penalty repeal took effect, and people who were uninsured in 2018—after the law was enacted—still had to pay the individual mandate penalty when they filed their tax returns in 2019.

The individual mandate penalty helped to keep premiums lower than they would otherwise have been. There was no Obamacare penalty back when insurers were allowed to reject applicants with pre-existing conditions, but with coverage now guaranteed-issue, it was important to have a mechanism to ensure that healthy people would remain in the pool of insureds. The individual mandate was part of that, but the ACA’s premium subsidies are likely playing an even larger role, as they keep coverage affordable for most middle-class enrollees, regardless of whether they’re healthy or not.

The Congressional Budget Office has estimated that premiums in the individual market will generally trend 10 percent higher without the individual mandate penalty than they would have been with the penalty. Unsurprisingly, most of the rate filings for 2019 included a rate increase related to the elimination of the penalty. That is now baked into the standard premiums going forward, so the higher rates apply in future years as well.

The individual mandate has long been the least-popular consumer-facing provision of the ACA, although most Americans already had health insurance before the ACA, and didn’t need to worry about the penalty for being uninsured.

It’s worth noting that the elimination of the individual mandate penalty is the crux of the Texas v. US (California v. Texas) lawsuit, which seeks to overturn the entire ACA. The case was heard by the Supreme Court in November 2020, and a ruling is expected in the spring or early summer of 2021.

Uninsured tax filers were more likely to get an exemption than a penalty

Although there were still 33 million uninsured people in the US in 2014, the IRS reported that just 7.9 million tax filers were subject to the penalty in 2014 (out of more than 138 million returns). According to IRS data, 12 million filers qualified for an exemption.

The number of filers subject to the ACA’s penalty was lower for 2015 (on returns that were filed in 2016), as overall enrollment in health insurance plans had continued to grow. The IRS reported in January 2017 that 6.5 million 2015 tax returns had included individual shared responsibility payments. But far more people—12.7 million tax filers—claimed an exemption for the 2015 tax year. For 2016, the IRS reported that 10.7 tax filers had claimed exemptions by April 27, 2017, and that only 4 million 2016 tax returns had included a penalty at that point.

A full list of exemptions and how to claim them is available here, including a summary of how the Trump administration made it easier for people to claim hardship exemptions (hardship exemptions continue to be important in 2019 and beyond, as they’re necessary for people age 30 and older to be able to purchase catastrophic health insurance plans).

Most Americans weren’t affected by the penalty

As noted above, only 4 million tax returns for 2016 included the ACA’s individual mandate penalty (as of late April, 2017; people who got a tax filing extension hadn’t yet filed by that point, so the total number of filers who owed a penalty likely ended up higher than 4 million). The vast majority of tax filers had health insurance, and even among those who didn’t, penalty exemptions were more common than penalty assessments.

Most Americans already get health insurance either from an employer or from the government (Medicaid, Medicare, VA); they didn’t need to worry about the penalty because employer-sponsored and government-sponsored health insurance count as minimum essential coverage.

Individual market major medical plans available on or off-exchange are considered minimum essential coverage, and so are grandfathered plans and grandmothered plans. And although health care sharing ministries are not considered minimum essential coverage, people with sharing ministry coverage were eligible for one of the exemptions under the ACA.

Plans that aren’t considered major medical coverage are not subject to the ACA’s regulations, and do not count as minimum essential coverage, meaning people were subject to the penalty if they relied on something like a short-term plan and were not otherwise exempt from the Obamacare penalty. Things like accident supplements and prescription discount plans may be beneficial, but they do not fulfill the requirement to maintain health insurance.

How big were the penalties?

The IRS reported that for tax filers subject to the penalty in 2014, the average penalty amount was around $210. That increased substantially for 2015, when the average penalty was around $470. The IRS published preliminary data showing penalty amounts on 2016 tax returns filed by March 2, 2017. At that point, 1.8 million returns had been filed that included a penalty, and the total penalty amount was $1.2 billion — an average of about $667 per filer who owed a penalty.

Although the average penalties are in the hundreds of dollars, the ACA’s individual mandate penalty is a progressive tax: if a family earning $500,000 decided not to join the rest of us in the insurance pool, they would have owed a penalty of more than $16,000 for 2018. But to be clear, the vast majority of very high-income families do have health insurance.

Today, the median net family income in the United States is roughly $56,500 (half of U.S. families earn less; half earn more.) For 2018, the penalty for a middle-income family of four earning $60,000 was $2,085 (the flat-rate penalty would have been used, because it was larger than the percentage of income penalty; see details below, under “how the penalty works”). This is far less than the penalty a more affluent family would have paid based on a percentage of their income.

The penalty could never exceed the national average cost for a bronze plan, though. The penalty caps are readjusted annually to reflect changes in the average cost of a bronze plan:

  • The IRS announced in Revenue Procedure 2015-15 that the maximum 2015 penalty was $2,484 for a single individual and $12,420 for a family of five or more (both slightly higher than the maximum penalty amounts for 2014).
  • For 2016, Revenue Procedure 2016-43 increased the maximum penalty to $2,676 for a single individual, and $13,380 for a family of five or more, if they were uninsured in 2016.
  • For 2017, Revenue Procedure 2017-48 increased the maximum penalty to $3,264 for a single individual, and $16,320 for a family of five or more. The significant rate increases that we saw for 2017 (roughly 25 percent) mean that the average bronze plan was quite a bit more expensive in 2017 than it was in 2016. And that means that the maximum penalty was also quite a bit higher.
  • Rates increased considerably again for 2018, although the bulk of the rate increase was on silver plans (due to the elimination of federal reimbursement for cost-sharing reductions). According to Revenue Procedure 2018-43, the national average cost of a bronze plan increased to $3,396 in 2018 for a single individual and $16,980 for a family of five or more. This is the last year that the IRS had to calculate the national average cost of a bronze plan, since the federal individual mandate penalty no longer applies as of 2019. But as noted above, several states have or are implementing individual mandates with maximum penalties based on the average local cost of a bronze plan.

The maximum penalties rarely applied to very many people, since most wealthy households were already insured.

No longer a question on federal tax return about health coverage (but it’s still on some state returns, and Form 8962 is still applicable if you get a premium subsidy)

From 2014 through 2018, the federal Form 1040 included a line where filers had to indicate whether they had health insurance for the full year (see the upper right corner, under the spaces for Social Security numbers).

But since 2019, Form 1040 has no longer included that question, as there’s no longer a penalty for being without coverage.

But state tax returns for DC, Massachusetts, New Jersey, California, and Rhode Island do include a question about health coverage. Maryland’s tax return also asks about health insurance coverage, in order to try to connect uninsured residents with affordable coverage. Colorado’s tax return will have a similar feature as of early 2022 (but Maryland and Colorado do not penalize residents who don’t have health insurance).

In addition, nothing has changed about premium subsidy reconciliation on the federal tax return. People who receive a premium subsidy (or those who enroll through the exchange in a full-price plan but want to claim the subsidy at tax time) will continue to use Form 8962 to reconcile their subsidy. Exchanges, insurers, and employers will continue to use Forms 1095-A, B, and C to report coverage details to enrollees and the IRS.

health-reform-penalty

How the penalty worked

[Note that in most cases, the states that are implementing their own individual mandates are following this same basic outline in terms of how the penalty works, with the details based on the federal penalty levels that applied in 2018.] Your individual mandate tax is the greater of either 1) a flat-dollar amount based on the number of uninsured people in your household; or 2) a percentage of your income (up to the national average cost of a Bronze plan , as determined by the IRS and adjusted annually to reflect changes in premiums).

This means wealthier households will wind up using the second formula, and may be impacted by the upper cap on the penalty. For example: for 2017, an individual earning less than $37,000 would pay just $695 (flat-dollar calculation) while an individual earning $200,000 would pay a penalty equal to the national average cost of a bronze plan ($3,396 for 2018). This is because 2.5% of his income above the tax filing threshold would work out to about $4,740, which is higher than the national average cost of a bronze plan. The IRS publishes the national average cost of a bronze plan in August each year; that amount is used to calculate penalty amounts when returns are filed the following year.

1) Flat-dollar amount

In 2014, the flat-dollar penalty was $95 per uncovered adult (it climbed to $325 in 2015, and $695 in 2016) plus half that amount for each uninsured child under age 18. Your total household penalty is capped at three times the adult rate, no matter how many children you have.

In 2014, that was $285 ($975 in 2015, and $2085 in 2016). Starting in 2017, the flat-rate penalty is subject to annual adjustment for inflation. But for 2017, the IRS confirmed that there was no inflation adjustment, so the flat-rate penalty continued to be $695 per adult in 2017, with a maximum of $2,085 per family. And for 2018, that was once again the case, as the IRS confirmed that the flat rate penalty would remain unchanged in 2018. After 2018, there is no longer be a penalty imposed by the IRS, although New Jersey, Massachusetts, and DC now impose their own penalties; California and Rhode Island will join them in 2020.

2) Percentage of income

In 2014, the penalty was 1 percent. It rose to 2 percent in 2015, and to 2.5 percent for 2016 and beyond.

The penalty is capped at the average cost of a Bronze plan, which for 2018 was $3,396 for an individual and $16,980 for a family of five or more (those maximum amounts are prorated monthly for tax filers who were uninsured for only part of the year). The percentage of income penalty is calculated based on the household’s income above the tax filing threshold.

For most people, “household income” is simply adjusted gross income from Form 1040. But if you have non-taxable Social Security benefits, tax-exempt interest, or foreign earned income and housing expenses for Americans living abroad, you’ll need to add those amount to your AGI from your 1040. Be sure to include income from any dependents who are required to file a tax return.

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Avoid scams while shopping for insurance

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It’s been more than seven years since the health insurance marketplaces (exchanges) first opened for business. Well over 11 million people have enrolled in plans through the exchanges for 2021, and some people also have ACA-compliant individual market coverage obtained outside the exchanges (directly from insurers). And thanks in large part to the ACA’s expansion of Medicaid, enrollment in Medicaid coverage has grown by nearly 20 million people since 2013 (there’s been a significant increase in Medicaid enrollment as a result of the COVID pandemic). And the uninsured rate is still in the single digits, despite the fact that it’s been rising during the Trump administration’s tenure, after dropping to a record low by 2016.

But while there’s plenty to celebrate, any major change like the ACA — especially with the subsequent decade of additional health care reform debate — comes with scammers who take advantage of the confusion that invariably surrounds a major policy shift. Here are some tips to keep in mind:

Scammers tap into confusion over ACA

The ACA was signed into law in 2010, and almost immediately, scammers began looking for ways to make a quick buck. Soon after the law passed, Jim Quiggle, spokesman for the Coalition Against Insurance Fraud, says he wasn’t surprised by the sudden influx of health insurance scams. “Crooks are exploiting the mass confusion over what the health reform means to the average consumer,” Quiggle said. “With each new aspect of reform, another opportunity for fraudulent marketing opens up.”

Quiggle explained that rip-off artists go door to door and use blast emails or pop-up ads to convince unsuspecting customers that they’re selling “ObamaCare.” And, to create a sense of urgency, the scammers tell potential scam victims that the law requires them to buy the insurance they’re selling and do it before an “enrollment period” closes.

It’s true that the ACA created an annual open enrollment period for individual market health insurance; outside of open enrollment, coverage can only be obtained if you have a qualifying event (prior to 2014, people could apply for individual health insurance whenever they liked, but the applications were then medically underwritten and could be rejected based on medical history). But again, buyer beware. If in doubt, double-check the facts with a third party to make sure you’re dealing with a legitimate source of coverage.

Marc Young, spokesman for Insurance Commissioner Kim Holland, co-chair of the National Association of Insurance Commissioners’ Anti-Fraud Task Force, explains that criminals sometimes cleverly mask themselves as insurance companies, selling plans that are completely fraudulent. “Unfortunately, the criminals provide all of the materials that legitimate companies provide,” Young says. “They’ll use the industry language to describe levels of coverage. They’ll issue authentic-looking insurance cards.”

Some companies will even set up storefronts in communities, selling policies and sticking around just long enough to file bogus claims – only to completely vanish into thin air overnight. These companies are “very deceptive, very misleading, with very professional looking materials,” Young says.

Again, it’s a good idea to double-check with your state’s department of insurance to make sure that the person and company you’re dealing with are both licensed to do business in your state.

Understand your state’s exchange

In addition to outright scams like identity theft, consumers need to be aware of the possibility that some agents might try to portray their agency as “the exchange” and attract customers who think they’re purchasing coverage through the official exchange. This is further complicated by the fact that licensed agents and brokers who are certified by their state’s exchange can help consumers enroll in exchange plans.

Individual policies can still be purchased outside of the exchanges. Like exchange plans, they are ACA-qualified which means they are guaranteed issue, cover the essential health benefits, and have the ACA’s limits on out-of-pocket maximums. Some are sold by carriers who also sell policies in the exchange, but some carriers only offer plans outside the exchange.

From a consumer perspective, the primary difference between exchange and non-exchange plans is the availability of subsidies. Premium subsidies and cost-sharing subsidies are only available on plans that are purchased through the exchange. Each state has just one official exchange where subsidies are available and in 36 states as of 2021, it’s Healthcare.gov.

If you’re in DC or one of the 14 states that run their own exchanges, you can still use Healthcare.gov to get to the exchange website in your state so that there’s no doubt you’re on the correct site. If a certified broker or agent assists you with your exchange plan application, you will still be submitting your application on the official exchange web site. If you’re submitting an application anywhere else, you’re applying for an off-exchange plan and subsidies will not be available.

It’s important to understand, however, that there are approved direct enrollment entities that are authorized to enroll people in on-exchange plans via their own websites, without having to use the actual exchange website. HealthSherpa is an example of this; they only enroll people in on-exchange plans, and enrolled 1.9 million of the 8.2 million people who signed up for plans through the federally-run marketplace (HealthCare.gov) for 2021. CMS has a list of entities that are approved to provide direct enrollment. But if you’re using one of them, you’ll still want to confirm that you’re enrolling in an on-exchange plan, if that’s your preference.

Know how the law affects you, or doesn’t

Another commonly misunderstood aspect of the ACA – and one that scammers have tried to target – is that the majority of Americans do not need to obtain health insurance through the exchanges.

Most Americans haven’t had to make any changes at all under the ACA. If you get your coverage through Medicare, Medicaid, or your employer, you do not need to worry about the exchanges at all.

[If you’re enrolling in Medicaid, you may be able to do so through the exchange, depending on why you’re eligible for Medicaid. For MAGI-based Medicaid (most enrollees under the age of 65), some states have switched their entire application system to run through the exchange, so check with your state Medicaid office if you have questions.]

In addition to being a portal for Medicaid enrollment, the exchanges were primarily designed to provide a shopping platform for people who purchase individual health insurance (and for small-business health plans if the employer chooses to obtain coverage through the SHOP exchange, which is still available in some states). This includes people who already had individual health insurance prior to 2014, as well as people who were previously uninsured and didn’t have access to a group plan through an employer. But nearly two-thirds of the population have either employer-sponsored coverage or Medicare — and can ignore the exchanges — while another 20 percent have Medicaid and may be able to ignore the exchange, depending on how their states have set up the enrollment and renewal process.

If you’re purchasing individual health insurance, the exchanges are likely the best option if you’re eligible for subsidies. If not, you can shop both in and out of the exchange to find the policy that best fits your needs and budget. Although the exchanges’ online comparison and enrollment features have been heavily publicized, applicants can also enroll by mail or in person. You can contact your state’s department of insurance to verify that the person, agency, or website you’re working with is certified with the state’s exchange.

If you’re shopping for an off-exchange plan, your state’s department of insurance can help you make sure you’re working with a properly licensed agent and buying a legitimate health insurance policy.

Watch out for fakes and frauds

Navigators and brokers will not charge you any sort of fee for their services (in a few states, brokers are allowed to charge fees if they’re not paid a commission by the insurer; but these fee-based brokers are rare and there are extensive rules regarding the disclosures they have to provide to their clients). The only money you need to pay is your first month’s premium, either when you enroll or once you get the invoice. If people are asking you for any additional fee, be wary of a scam.

Seniors who are enrolled in Medicare don’t need to do anything differently. They benefit from Obamacare, but don’t need to make any changes to their coverage and certainly don’t need to “enroll in Obamacare” or do anything with the exchanges.

If you enroll in a health plan, you’ll need to provide relatively extensive personal information, particularly if you’re applying for premium subsidies (and if you get a premium subsidy, you have to reconcile it on your tax return). There’s no legitimate way to enroll in just a minute or two with nothing more than a name and social security number, so be wary of potential scams in which the salesperson is attempting to gather some basic — but personal — information under the pretense of enrolling you in health coverage.

If the plan you’re enrolling in will take effect immediately, chances are it’s not an ACA-compliant plan. The same is true if it excludes pre-existing conditions or doesn’t cover some of the essential health benefits. Here’s more about how you can determine whether the plan you’re considering is compliant with the ACA.

Discount card scams leave consumers holding the bag

Some salespeople offer discount medical cards or “buyers clubs” – some of which legitimately provide discounts on certain expenses such as prescription drug costs and dental services through a network of providers. In some cases, however, unscrupulous marketers are overstating the size of those networks, or offering unbelievable discounts – “sometimes up to 85 percent off,” Quiggle says.

And, in some cases, consumers are being drawn into those plans on the false promise that the discount card programs will pay for major medical expenses. “We see cases where people are showing up at hospitals presenting their discount card because they think they have health insurance, only to be told they’ll have to pay for services out of pocket,” Quiggle says.

In other cases, consumers incur large medical expenses, then find out that “pre-authorized surgeries” or other large expenses won’t be reimbursed.

Discount plans have existed since long before the ACA was written. But since they’re not considered insurance, they’re not regulated under the ACA, which means that unless a state takes steps to limit them, they can still legally be sold. They don’t provide much in the way of benefits though, particularly in the case of a large claim.

What has changed as a result of Obamacare is the affordability of real health insurance for people with low- and mid-range incomes. Discount plans stood out in the past because of their price, which was far cheaper than real health insurance. But because of the ACA’s premium tax credits (subsidies), the average after-subsidy premium for the 86 percent of exchange enrollees who got a subsidy in 2020 was just $84/month.

Ignore exchange naysayers

It’s inevitable that there have been some unscrupulous people who attempt to sell worthless “insurance” under the guise of Obamacare. If a policy seems too good to be true, it probably is. If in doubt, contact your state’s department of insurance before you submit an application.

Consumers should also be aware that some groups have a vested interest in fighting against Obamacare. They are often politically motivated, and aren’t above spreading outright lies about the ACA in order to turn people against it. Focus on what’s best for you and your family, and ignore people who tell you to avoid the exchanges without having any knowledge of your specific situation.

There is no one-size-fits-all when it comes to healthcare, which is why there are a variety of plans available in the individual market, both in and out of the exchanges. Open enrollment for 2021 individual market coverage ended in most states in December 2020, but opportunities to enroll in ACA-compliant coverage are available year-round if you experience a qualifying event. If you do, take your time, compare all of the available plans, seek help from a reputable source, and be sure that you read the fine print on the plans you’re considering before you enroll.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Is there still a penalty for being uninsured?

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Key takeaways

Q. Is there still a penalty for being uninsured?

A.  When the Affordable Care Act was written, lawmakers knew that it would be essential to get healthy people enrolled in coverage, since insurance only works if there are enough low-cost enrollees to balance out the sicker, higher-cost enrollees. So the law included an individual mandate, otherwise known as the shared responsibility provision.

This controversial provision stipulated that people who didn’t have minimum essential coverage would be subject to a tax penalty unless they were exempt from the shared responsibility provision.

But that tax penalty was eliminated after the end of 2018, under the terms of the Tax Cuts and Jobs Act of 2017. Technically, the individual mandate itself is still in effect, but there’s no longer a penalty to enforce it.

(The continued existence of the mandate – but without the penalty – is the crux of the California v. Texas lawsuit, in which 18 states are challenging the constitutionality of the mandate without the penalty, and arguing that the entire ACA should be overturned if the mandate is unconstitutional. A judge ruled in December 2018 that the ACA should indeed be overturned, and Trump Administration agrees. The case was appealed to the Fifth Circuit and oral arguments were heard in July 2019. The ruling was issued in late 2019, essentially just kicking the can down the road: The appeal court panel agreed with the lower court that the individual mandate is unconstitutional but remanded the case back to the lower court to determine which aspects of the ACA should be overturned. The case was then heard by the Supreme Court in the fall of 2020, with a ruling expected in the spring of 2021. But with the Biden administration and a very slim Democratic majority in Congress, it may be possible to make the case moot before the ruling is issued.)

DC, Massachusetts, New Jersey, California, and Rhode Island have penalties for being uninsured

Although the IRS is not penalizing people who are uninsured in 2019 and beyond, states still have the option to do so. A handful of states have their own individual mandates and penalties for non-compliance:

  • Massachusetts implemented an individual mandate and penalty in 2006, and it continues to be in effect (people who were uninsured in Massachusetts between 2014 and 2018 didn’t have to pay both the state and federal penalties, but now that there’s no federal penalty, the state’s penalty applies just like it did prior to 2014). The Massachusetts penalty only applies to adults, and the amount of the penalty is based on the person’s income and the cost of health plans available via the Massachusetts health insurance exchange (here are the details for penalty amounts in Massachusetts in 2020).
  • The District of Columbia implemented an individual mandate and penalty that took effect in January 2019. The penalty amounts are based on the amounts that applied under the federal penalty in 2018 (a flat $695 per adult — half that for a child — or 2.5 percent of income, whichever is higher), although the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in DC, as opposed to the average nationwide cost of a bronze plan.
  • New Jersey also implemented an individual mandate and penalty that took effect in January 2019. The penalty amounts also mirror the previous federal penalty, but the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in New Jersey. The state is using penalty revenue to help fund its new reinsurance program.
  • California enacted legislation in 2019 that created an individual mandate starting in 2020, with a penalty for non-compliance. California also created a new state-based premium subsidy to help make coverage more affordable.
  • Rhode Island also implemented an individual mandate effective in 2020, with a penalty for non-compliance. The revenue generated from the penalty is used to help fund the state’s new reinsurance program. Both the individual mandate and the reinsurance program will have a stabilizing effect on Rhode Island’s individual market.

Vermont enacted a mandate but opted not to impose any penalty for non-compliance

Vermont enacted legislation in 2018 to create a state-based individual mandate, but they scheduled it to take effect in 2020, instead of 2019, as the penalty details weren’t included in the 2018 legislation and were left instead for lawmakers to work out during the 2019 session. But the penalty language was ultimately stripped out of the 2019 legislation (H.524) and the version that passed did not include any penalty. So although Vermont does technically have an individual mandate as of 2020, there will not be a penalty associated with non-compliance (ie, essentially the same thing that applies at the federal level).

Maryland also removed penalty language from 2019 legislation

Maryland enacted HB814/SB802 in 2019. The legislation initially included an individual mandate and penalty that would have taken effect in 2021. But that portion of the bill was removed before passage, despite support from insurers and the Maryland Hospital Association, and the final version did not include any of the original mandate penalty language. Instead, the new law creates an “easy enrollment health insurance program” that will use tax return data to identify people who are uninsured and interested in obtaining health coverage, and then connect them with the Maryland health insurance exchange (more details here, in the fiscal note).

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

The post Is there still a penalty for being uninsured? appeared first on healthinsurance.org.

 

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