Amid the deluge of news about the problems with and political blame-game surrounding the Affordable Care Act, a critical point has apparently been missed: Love it or hate it, every American has to have health insurance by March 31.(1)
Unfortunately, a large number of Americans are either confused about or completely unaware that there is a deadline for signing up for coverage. According to a poll taken by the non-profit Kaiser Family Foundation last month, more than 75% of Americans who do not have health insurance and, thus, are required by law to get it, are unaware of the deadline. What's more, half don’t understand how they or their family will be affected, and nearly two-thirds admit they know little or nothing about the health-care marketplaces where they can get information and apply for coverage.
For an interactive look at what various types of individuals think of the ACA, click here.
“People are procrastinating,” says John DeVito, president of Flexible Benefits, an Illinois-based insurance broker that also runs a health insurance exchange. His concern is that if you wait until the last minute to begin to investigate your options or to sign up, something could go wrong and you will miss the deadline. “They don’t understand that you cannot buy an individual policy starting April 1.”
In other words, if you don't sign up in March, you lose the opportunity to do so until the next enrollment period opens later this year. However, even if you enroll then, you coverage will not begin until Jan. 1, 2015.
You are toast. Hosed. Outa luck.
Your only hope is that a) you and/or your family members don’t get sick or have an accident over the next nine months, or b) you have a “qualifying event” (have a baby, get divorced, laid off, you change jobs and lose coverage), then you become eligible to buy an ACA-approved policy even if it’s after the end of this month.
Of course, you could opt for a short-term policy to tide you over, but these are expensive. And you’d have to pay the full amount for nine months of coverage up front instead of making a much smaller payment each month.
The only way you can be assured of coverage is if you sign up with an ACA-approved insurance firm no later than midnight March 31.
Maybe you plan to roll the dice and take your chances. You figure, “I’m young, single, healthy. I hardly ever get sick. Why spend the money? How are they going to find out?”
Well, there's a penalty if you remain uninsured. “You have to provide proof of purchase when you file your tax return,” says DeVito. And don’t try to fake it, the insurance companies are registered with the federal government.
In case you think it’s is a mere slap on the wrist, consider this: The penalty is either $95 or 1% of your gross pay. Whichever amount is greater. So, if you earn $50,000 per year, your penalty is $500. But don’t worry, the government makes it convenient to pay the fine. “They take it right out of your tax refund,” says DeVito. (If you don’t qualify for a refund, they just add the penalty to your tax bill.)
Perhaps your income is so low you don’t have to file a tax return. No problem, in that case you probably qualify for Medicaid, which means you have health insurance and you don’t have to purchase an ACA plan. Veterans are also covered by the VA.
The Young and the Reckless
DeVito is especially concerned about young adults who he says “are just not buying” the insurance. Yes, the launch of the ACA insurance exchanges was a mess and there are still glitches in the sign-up process, but this will not get you out of owing the penalty. “People are so discouraged they’re not even trying” to find out about what’s available, he says.
For people who can't afford to buy a plan, there are government subsidies that can help pay the premium. If you are eligible for a credit to help defray the cost of coverage, you don’t have to wait until your file your taxes next year in order to receive it. There’s an option that allows you to “get it now” and have all or part of the money paid directly to the insurance provider you choose. You can find a subsidy calculator here.
DeVito recommends that at the very least, those who are young and relatively healthy consider a high-deductible plan. This type of plan is less expensive because the insurance company isn’t on the hook for paying benefits until your medical bills exceed a certain amount, such as $5,000. The point, he says, is that it “protects you from financial catastrophe.” If you get a job that offers health insurance, you can drop your ACA plan.
Given the cost of health care today, it’s easier than you might think for bills to mount up. DeVito tells the story of one of his own employees whose 19-year old son was involved in a serious car accident. His medical bills after nine surgeries exceeded $1.5 million. Fortunately, because he was under age 26, he was covered under his father’s insurance plan. If you’re older than that, you are on your own.
Buying insurance under the ACA is just the opposite of how insurance typically works, says DeVito. “You can always cancel your coverage, but you can’t always buy it. Miss the March 31 cutoff and “It’s as if you went to a store for an operation and there’s a sign that says ‘Closed Until Next Year.’”
1. Not to confuse an already convoluted set of regulations, there are two deadlines for signing up: March 15 to get coverage beginning April and March 31 to have insurance coverage starting May 1.
Ms. Buckner is a Retirement and Financial Planning Specialist and an instructor in Franklin Templeton Investments' global Academy. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content.
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