When the comprehensive health care reform law, the Affordable Care Act, was implemented in 2010, it gave millions of Americans access to affordable health care. But it also made it mandatory to have health insurance. What does that mean? Is it illegal to not have health insurance?
Join us as we delve into health insurance legislation in the US and how it impacts everyday Americans. We’ll explore the Act’s background, purpose, and why it’s crucial to have insurance coverage. Plus, we’ll take a look at what happens when you don’t have health insurance. Let’s dive in!
Understanding Health Insurance Laws
When it comes to medical expenses, having health insurance can help cover the majority, if not all, of the costs. The insurer assesses the potential risk of healthcare expenses and determines a monthly premium that you must pay to access the coverage.
When you apply for health insurance, you enter into a legal contract with the insurance provider. If your insurance is done through your employer, they enter into a financial agreement. But the result is the same. In return for monthly payments, the insurer covers at least part of qualifying medical expenses.
Co-Pays, Co-Insurance. And Deductibles
You will usually still have to pay certain medical expenses out-of-pocket or split certain costs (called co-pays or coinsurance) with the insurance provider. Deductibles also usually apply. They are the amounts that you have to pay for medical costs before your coverage takes effect.
All types of insurance have out-of-pocket costs, from vehicle insurance to household contents insurance. But when it comes to medical bills, your out-of-pocket costs can still be substantial.
Co-Pays
Health insurance doesn’t cover 100% of your medical bills all the time. While the exact figure may differ from one policy to the next, a co-pay is a fixed amount that you have to pay, with the insurer paying the rest.
For example, if your health insurance plan has a $30 co-pay for a doctor’s office visit, you would be responsible for paying $30 each time you visit a healthcare provider, and the insurance company would cover the remaining cost of the visit.
Co-pays can vary depending on the type of service or medication, such as primary care visits, specialist visits, emergency room visits, or prescription drugs.
Always check your policy’s co-pay requirements before signing the paperwork.
Co-Insurance
Co-insurance is basically the same as co-pays, but it is a fixed percentage instead of a fixed amount in dollars. If your coinsurance rate is 20%, your insurance would cover 80% of the cost, and you would be responsible for the remaining 20%.
Once again, this may differ from one policy to the next. And, as with co-pays, although the fixed percentage remains the same, it may be different for surgical procedures versus prescription drugs.
Ensure that you understand how a co-insurance percentage affects your out-of-pocket costs before signing up for a health plan.
Deductible
A deductible is the amount you’ll be paying before your coverage takes effect for each year of your insurance plan. This, too, can differ from one policy to the next. This is why you must familiarize yourself with these terms and conditions beforehand.
If your deductible is high and you don’t seek medical treatment often, you might end up paying most of your medical costs each year.
However, if you go to the doctor often, have complex surgery, or are on chronic medication, you may find that your insurer carries most of the financial burden.
Also, don’t forget that your circumstances may change and your medical needs may increase. As we age, so do our healthcare needs.
The History Of Health Insurance Laws
The history of health insurance laws in the US is not as straightforward as you may think. To understand health insurance laws as they are now, we have to take a short trip back in time.
The Affordable Care Act (ACA) was signed into law in 2010 by President Obama. It soon got the nickname Obamacare, and most people still know it by this name. But what exactly did this health care reform act reform?
Why The ACA Was Necessary
The ACA was not an overnight decision. It was the culmination of a long struggle to see improvements in everyday Americans’ access to healthcare services. US citizens were struggling to pay their medical bills. And even though health insurance was available to them, most couldn’t afford it.
To make matters worse, many people living with chronic medical conditions were being denied insurance coverage for their pre-existing conditions. Medicaid was available to lower-income families, but too many people who needed it didn’t meet the criteria for acceptance.
The ACA changed that. It expanded Medicaid coverage for low-income households. It made affordable health insurance more accessible on a government website that listed all the options by state. It even put an end to the denial of coverage due to pre-existing medical conditions.
But it also made health insurance mandatory. This was meant to ensure that everyone got covered, and could afford basic health care. However, this put even more strain on the American public, so the mandate was scrapped at the federal level.
State-by-State Regulations
Next, we turn our attention to the state-by-state regulations for health insurance. When the federal mandate was lifted, it meant that it was no longer mandatory to have health insurance. However, this did not preclude individual states from instituting their own mandates.
These 40 US states do not have an individual mandate for health insurance:
Alabama
Alaska
Arizona
Arkansas
Colorado
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Michigan
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
West Virginia
Wisconsin
Wyoming
These five US states do not have an individual mandate for health insurance but have been considering doing so in the future:
- Connecticut
- Hawaii
- Maryland
- Minnesota
- Washington
US States That Have Individual Mandates For Health Insurance
These four US states, and one district, have an individual mandate for health insurance, with tax penalties for non-compliance:
- California
- Massachusetts
- New Jersey
- Rhode Island
- District of Columbia (Washington, D.C.)
The state of Vermont also has an individual mandate for health insurance, but no tax penalty for non-compliance.
California Penalties
If you don’t comply with California’s health insurance mandate, the current penalty for the year will be at least $850 per adult in your household and $425 per dependent child under the age of 18. Depending on your income, it could be even higher.
When you file your tax return, this penalty will be imposed by the California Franchise Tax Board.
Massachusetts Penalties
In Massachusetts, the penalty is based on 50% of the cost of the cheapest insurance plan in the state. However, your tax penalty will be calculated based on your age, income, and the number of household occupants that you are responsible for. For individuals, this penalty can reach up to $1,908.
New Jersey Penalties
In New Jersey, the tax penalty is based on your income and family size. The maximum penalty is the average annual premium for the cheapest tier of ACA health insurance.
According to the official site of the State of New Jersey, people who don’t comply with the mandate must remit a Shared Responsibility Payment when they file their New Jersey Income Tax returns. Those who don’t need to file income tax returns are not subject to this penalty.
Rhode Island Penalties
You may be liable for a penalty equal to 2.5% of your total household income if you don’t have health insurance in the state of New Jersey. But the maximum penalty will not be more than the cost of the total annual premium for the cheapest insurance plan available in the state.
District of Columbia Penalties
In Washington, D.C., failure to have health insurance will also mean a penalty of the year’s premiums for the cheapest health insurance plan. Alternatively, it will be equal to 2,5% of the total household income above the Federal tax filing threshold.
The Impact Of Not Having Health Insurance
Whether or not you live in a state that has an individual mandate, there are consequences for not having health insurance.
- If you live in a state that has an individual mandate, you could be liable for tax penalties if you have no health insurance.
- If you live in a state that is considering an individual mandate, you could be liable for such penalties in the future.
- If you live in a state that has no individual mandate and is not considering one, you are at the mercy of high medical bills without adequate health insurance.
No matter how you look at it, having health insurance is a good idea. But we understand that most uninsured individuals are worried about the expense. There’s good news, though.
If you qualify for an Obamacare subsidy, you could either lower your upfront costs or receive premium tax credits. You may even qualify for zero monthly premium costs if you are living below the Federal Poverty Line.
Common Misconceptions About Health Insurance Laws
Health insurance laws can seem very complicated to the layperson, and this has caused many misunderstandings over the years. These are the most common misperceptions about health insurance laws in the US.
All Health Insurance Plans Are The Same
There are many different types of health insurance plans. Searching for the right health plan is a must, though, as they differ widely. Some are more expensive but offer wider coverage. Others are less expensive but offer reduced coverage and higher initial out-of-pocket payments.
If You’re Denied Coverage, There’s Nothing You Can Do
This is a common belief, but it is not based on fact. You do have recourse if you are denied health insurance coverage. In fact, the denial letter must contain the steps to take, to appeal the denial if you wish to do so.
You may contact the insurer to submit an appeal or request an external review.
If A Claim Is Rejected, You’re On Your Own
This is yet another myth. The truth is, you are not without options if your claim is rejected. A decision by your insurance provider to reject a claim can be appealed. Be sure to keep all documents about the medical treatment or medication that the rejected claim involves.
It’s Too Difficult To Understand Health Insurance
The qualified insurance brokers and consultants at Enhance Health will help you navigate the waters of health insurance plans. We can assist with choosing an insurance plan, ACA sign-up, and so much more.
There’s no need to fear all the insurance terminology; we make it simple and fast to get covered.
Conclusion
Is it illegal to not have health insurance? No. While certain states have an individual mandate, it’s not a crime to not have insurance.
However, non-compliance in these states puts you at risk of tax penalties. In states with no mandate, you will not be penalized, but that doesn’t mean that you shouldn’t get health insurance.
Living without the security of health insurance puts you at far greater risk of facing medical bills you can’t afford. Protect yourself and your family, with affordable health insurance you can rely on. Contact us for help with finding a health plan that works for you.
