Created by FindLaw's team of legal writers and editors | Last reviewed May 31, 2017
Health insurance affects everyone, whether you have it or not. Maybe you don’t have health insurance, but wish you did after experiencing an unexpected illness or accident. Or maybe you do have it, but you don’t know what’s covered. As a hot-button political topic, it’s important to recognize that health care laws are changing all the time, especially with each new administration. The article below discusses some of the more important legal aspects of health insurance.
How Health Insurance Works
When you have health insurance, typically you (or your employer) pays a monthly amount to the insurance company called a premium. If you incur covered medical expenses, you first pay whatever the deductible amount is, if applicable. The insurance company then pays for certain percentages of different types of medical care – for example, 80 percent of medically necessary surgical operations. You would then pay the other 20 percent, for example, until you reach your out-of-pocket maximum.
The insurance company hopes to insure as many healthy people as they can, because they’re less likely to use it, and their premiums help cover the costs of those who are less healthy and use their insurance more. Meanwhile, Medicare and Medicaid are federal programs that provide insurance to people over 65 (Medicare), low-income individuals (Medicaid), and many others.
Am I Required to Have Health Insurance?
Under current law, the answer for most people is yes, you are required to have health insurance. This is known as the “individual mandate” under the Affordable Care Act (ACA), or “Obamacare.” To fulfill this requirement, you must be enrolled in a plan that meets the minimum essential coverage standard. If you don’t have qualifying health insurance, you may be required to pay a fee called the “individual shared responsibility payment,” unless you qualify for one of the exemptions under the ACA.
How Much Is the Fee for Not Having Health Insurance?
The fee for not having insurance is calculated in one of two ways, and you pay whichever is greater. The first calculation is a flat dollar fee which was $695 per adult and $347.50 per child under 18, with a maximum of $2,085 in 2016. The second type is calculated as a percentage of income. For that same tax year, this amount was 2.5 percent of the portion of your income above the tax filing requirement ($10,350 for individuals filing in 2017, $20,700 for joint filers). The maximum amount under this calculation is the yearly premium cost for the national average price of a Bronze plan ($2,676 in 2016).
If you had insurance for part of the year, you would pay 1/12th of the annual amount for each month you or one of your dependents didn’t have coverage. So, for example, if you’re single, made $50,000, and didn’t have insurance in 2016, you would pay 2.5 percent of $39,650, which is $991.25 (and greater than $695, so you wouldn’t pay the flat fee instead). If you had coverage for three months of the year, you would pay 9/12 of that amount, or $743.44. If you’re uninsured for only one or two months of the year, you don’t have to pay the fee.
Exemptions from the Health Insurance Requirement
There are a number of exemptions from the requirement to have health insurance. If you’re not required to file a federal income tax return because your income is below the threshold amount, you’re automatically exempt. Otherwise, you need to claim the exemption when you file your taxes, although some exemptions must also be granted ahead of time. Some exemptions you may qualify for include the following:
- Coverage is unaffordable: The cost of a bronze plan is more than a certain percentage of your actual household income.
- Short coverage gap: You lacked health insurance for no more than two consecutive months.
- Noncitizens and citizens living abroad: Some individuals not legally present in the U.S., and certain citizens living abroad for at least 330 full days during the year are exempt.
- Hardship: You experienced certain circumstances that prevented you from obtaining coverage, such as homelessness, foreclosure, eviction, domestic violence, death of a close family member, and unpaid medical bills.
Is My Employer Required to Provide Health Insurance?
Not all employers have to provide health insurance to their employees. As of 2017, employers who had an average of at least 50 full-time employees during the preceding year must offer minimum essential coverage or pay a fee to the IRS. Employers and companies that do provide insurance must also abide by anti-discrimination laws as well as requirements of the Employee Retirement Income Security Act (ERISA) and the Health Insurance Portability and Accountability Act (HIPAA). These laws are meant to protect employees and plan beneficiaries.
What Does My Insurance Company Have to Cover?
As mentioned, health insurance laws change all the time. However, as of 2017, insurance companies must abide by the requirements of the ACA. These include the following provisions:
- Individuals may not be denied coverage based on pre-existing conditions, including pregnancy.
- Dependents can remain on their parents’ insurance plans until they turn 26.
- Plans must cover certain preventative services for free, including shots and screening tests.
- Plans may not have lifetime or yearly dollar limits on coverage of essential health benefits
- Companies may not cancel your health insurance just because you get sick.
- Plans must also cover certain breastfeeding equipment, birth control methods, and mental health and substance abuse services.
However, certain grandfathered health plans may be exempt from many of the ACA’s requirements.
Get Help Understanding How Health Insurance Laws Affect You
Health insurance law is a huge, complicated area of law, so it’s normal to have questions about how these laws affect you and your particular situation. And because these laws change regularly and contain numerous exceptions, it’s difficult to know what your rights and responsibilities are at any given time. Speak to an experienced insurance attorney today to better understand how current health insurance laws affect you.
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