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What You Must Know Now to Avoid the Obamacare Penalty

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For millions of Americans, time is running out to get qualifying health-insurance coverage under the Patient Protection and Affordable Care Act, better known as Obamacare. Yet even though penalties under Obamacare for not having coverage can be expensive for many families, what many don't know is that there are extensive exemptions that could prevent you from having to pay those penalties.

Understanding the Obamacare Penalty

One confusing aspect of the penalties under Obamacare is the complex calculations to figure out how much you owe.

To come up with your penalty for 2014, you have to look at two numbers. You calculate one of those numbers by taking $95 per adult and $47.50 per child in your family, and then taking either the total amount or the family maximum of $285, whichever is less. The second number comes from looking at your income, subtracting your appropriate tax-filing threshold of $10,000 for single filers and $20,000 for joint filers, and then multiplying the result by 1 percent. Whichever of those two numbers is greater is the amount of penalties that you'll owe if you don't have qualifying coverage or have an exemption.

In part to respond to the confusion about calculating penalties , the House of Representatives is expected to vote on legislation to eliminate the Obamacare penalty for the remainder of 2014. But there's no guarantee that would become law, leaving those without an exemption on the hook for penalties.

In addition, it's important to realize that even if you have insurance, you might still owe penalties under Obamacare. To avoid penalties, your coverage has to include certain basic benefits that, such as maternity care and mental-health care.

Many Ways to Be Exempt From Obamacare Penalties

The list of allowable exemptions from Obamacare is surprisingly long. The first is that you're allowed not to be covered for three months of the year, which is what makes the March 31 deadline so important. Those who don't have to file tax returns due to low income don't owe a penalty, nor do members of federally recognized Native American tribes, health-care sharing ministries, religious sects with objections to insurance, incarcerated prisoners and those who don't have legal immigration status.

One of the most important exemptions is the financial standard. If the lowest-cost coverage available would cost more than 8 percent of your household income, then you won't owe a penalty if you don't obtain that coverage.

In addition, you can qualify for many hardship exemptions. The hardship exemption application form from the government's Health Insurance Marketplace website lists 13 categories of exemptions as well as a 14th category for "other hardships." Some categories require no supporting evidence, such as those who are homeless or recently suffered domestic violence. Others require only basic documentation, including having received notice of eviction or foreclosure, getting a shut-off notice from a utility, having filed for bankruptcy or having suffered property damage due to a natural disaster.

Also among the exemptions are:
  • The death of a close family member.
  • Having medical expenses that you could pay at some point in the past two years.
  • Having unexpected higher costs from caring for a family member.
  • Having a child denied for Medicaid and Children's Health Insurance Program coverage, with another person required to provide medical support to the child.
  • Denial of Medicaid because your state didn't expand its Medicaid program.
  • Notice of cancellation of existing insurance, with other plans being unaffordable.
  • Having gotten a favorable eligibility appeals notice.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

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hanna.chan

If it actually was "affordable" maybe I would consider it.
I'm a 28 year old female and my insurance rates, according to the government website, would be $586/month. I've never been to the doctors in 2 years. How is this fair?!
Am I paying for the old, sick, and unhealthy to get healthcare cheaper?
I don't understand it. I wish it was more like auto insurance - where I could go on a site like Insurance Panda and have $25/month quotes within a few minutes. But instead, I spend nearly an hour to get a quote and it ends up being nearly six hundred dollars. What gives?

March 17 2014 at 11:18 PM Report abuse rate up rate down Reply
wbearl

My wife has just joined Harry Reid's "Liar Club". One of her Doctors sent out a letter saying he was no longer treating Medicare Patients or Medicaid Patients. When asked why he said that the Government wasn't even paying enough to cover office expenses. We have a good Supplemental, but he said he lawyer advised that if he refused one Government program he had to refuse all to avoid a discrimination law suit. He gave her a list of Doctors he recommended. She has called six of them and everything is great till we get to the Medicare. Then they aren't taking any new patients or they don't have any openings for at least 6 months. Thanks Obama!

March 07 2014 at 1:07 PM Report abuse +1 rate up rate down Reply
rkdbjd

How can anyone read this stuff and still think this is in any way good legislation?

March 07 2014 at 9:53 AM Report abuse +2 rate up rate down Reply
wrench701

I will vote against any congressman/senator in my district who voted for ACA.

March 07 2014 at 9:10 AM Report abuse +3 rate up rate down Reply
ajwfromo

I have worked all my life and have had Helath Ins.
Since the OC my health Insurance went up $750 and now I cannot
afford the health Care, but guess what either I find a way or I get
find at the end of the year. While the moochers that don't work get
it free. Obama reaaly knows how to take care of his people.

March 07 2014 at 9:10 AM Report abuse +3 rate up rate down Reply
malcolm

Will people that get to keep their old coverage be penalized?..If you don't have an ACA compliant plan then you may still face a tax/penalty/fine. No one has brought up that subject as of yet.

March 07 2014 at 8:59 AM Report abuse +1 rate up rate down Reply
drepke

What you need to know is that the law doesn't work and to show you by example the President has changed the law 31 times so dems don't get voted out of office in 2014 and 2016 and he lied about it since 2007 so he could get in office and stay there.

March 07 2014 at 7:33 AM Report abuse +5 rate up rate down Reply
Shadd

Over $6k deductables for single obammycare holders and over $13k deductables for family holders? You honestly think people have that much money in their bank accounts every year to pee away mr O'dummy? Or is it the fact that you want them to go into debt so that they have no other choice but to look to government for help so you and your pathetic greedy party have more low information voters?

March 07 2014 at 5:26 AM Report abuse +9 rate up rate down Reply
cosmo

can anyone answer me why it is that i am a white male, 32 years old and married, both my wife and i are hard working, tax paying citizens who cant really afford ocare or higher education without the risk of debt, but illegals, drug addicts, system abusers, and inmates get free healthcare and education, this system is not working. delinquents and illegal immigrants have a golden road paved for them when i sweat and suffer 6 days a week 70+ hours to not have the ability to see a doctor for a simple cold and not be locked in to paying high premiums, visitation fees, and the eventual deductible or face the other financial penalty for not buying into a flawed system! have we no voice? when is enough, enough? when is it time to take a stand? why aren't more people protesting this?

March 07 2014 at 2:52 AM Report abuse +14 rate up rate down Reply
1 reply to cosmo's comment
raptureus210

Short answer to you question Cosmo. First you must understand that this President said before he was elected that he belived in "Collective Salvation". What that means is that when a person takes from the rich and gives it to the poor they will receive rewards when the get to "their" heaven. His belief is deeply rooted in his reglious beliefs. When a person understands this, they can follow his past, present and future decision making process. Look at what he's done since he's been in office concerning raising taxes on the rich, giving freebies to the illegals. He's willing to continue this by destroying the middle class or the rich. Since the rich won't feel the effects as much, who's would? Right.. the middle class. This Collective Salavion belief and the dreams of his father is his deep motivation for his leading.

March 07 2014 at 8:03 AM Report abuse +4 rate up rate down Reply
John Myers

Now is where I really can't think much of this sort of plan. In the long run it is going to penalize the poor for not having the money to sign up. Since I cannot voluntarily give you the money you will take it from my SSI that I struggle to live on.
Now where will the money go? Maybebe to some congressman? You know, the ones that are exempt. That is Fowel feces, to try and keep it clean. I don't really believe that is where it will end up, but I do believe it will end up helping someone that doesn't really need the help but is good at milking the Govt.
This country needs to be rebuilt starting at the top and coming all the way down to the guy who gets $28.00 an hour to lean on a shovel and his apprentice who get's $26.00 an hour to hold up the shovel.
I remember working for $2.50 an hour and supported myself rather well. Now damned few will even work and then the ones who really work are only $8.85 an hour. I still get out and talk to them.
But, alas, my day's are getting low and the good thing about that is I won't have to put up with learning to speak Chinese.

March 07 2014 at 2:24 AM Report abuse +6 rate up rate down Reply
1 reply to John Myers's comment
rkdbjd

Keep in mind that anyone struggling to live on Social Security simply did not save for their own retirement. Nobody was ever meant to live on SS. That said, the fact that hard-wording people will be subsidizing those that don't is BS. What ever happened to taking responsibility for one's self? What ever happened to work work = getting ahead? Let's all remember that we are guaranteed the PERSUIT of happiness, not happiness itself.

March 07 2014 at 9:59 AM Report abuse rate up rate down Reply