Skip to main content

What is the Penalty for No Health Insurance?

A distraught middle-age couple looking at fines and tax problems for lacking the appropriate health insurance.

Having health insurance isn’t just a good idea, it’s required. What is the penalty for no health insurance? Well, it can be pretty pricey. The fine for not having health insurance is usually not worth the expense compared to having a plan in place. Here is information about the Obamacare tax penalty and what you can do to avoid it.

What is the penalty for no health insurance?

What’s the penalty for not having health insurance? If you do not report to the IRS proof of adequate healthcare coverage throughout the tax year, you will have to pay a tax penalty for not having health insurance for that year. You will either be sent a bill or have that amount taken out of your tax refund.

How much do I pay if I am penalized?

It depends, as the penalty is adjusted for inflation. For the 2016 tax year, the tax penalty for no health insurance was equal to 2.5% of your adjusted gross income (AGI), or $695 per adult and $347.50 per child, up to a maximum of $2,085, whichever is higher. The Obamacare penalty is currently under review with the new Presidential administration in place, so there may be changes as of this writing. However, it is recommended to assume that the health insurance penalty is still in force for the 2017 tax year. Speculation aside, it is recommended that you get healthcare coverage regardless of whether or not there is no health insurance penalty in place for your own protection.

Am I exempt from the penalty?

There are specific circumstances that could exempt you from the penalty for no health insurance. You may qualify for penalty exemption if:

  • You were uninsured for less than 3 months out of the year
  • You are Native American or eligible for health services through a provider through the Indian Health Service
  • The most affordable coverage costs more than 8% of your household income
  • You are exempt from filing a tax return because your income is too low
  • Your religion objects to the use of insurance
  • You belong to a healthcare sharing ministry
  • You are in prison
  • You have abroad for more than one year
  • You qualify for a hardship exemption due to issues such homelessness, eviction, bankruptcy, and other such circumstances

If you believe that you qualify for an exemption, you can claim it when you file your tax return. However, there will likely be follow up questions and you may need to provide evidence to support your claim.

What can I do to avoid the health insurance penalty?

The simplest way to avoid a penalty is to have insurance. The ACA has set up a health insurance marketplace at Covered California that allows Californians to sign up for an affordable plan during Open Enrollment. Health insurance from a private provider or through your employer can count, too. No matter which path you choose, in order to avoid paying a penalty, your individual health insurance plan must provide coverage for:

  • Emergency services
  • Ambulatory patient services
  • Hospitalization
  • Maternity and newborn care
  • Prescription drugs
  • Lab services
  • Mental health and substance use disorder services
  • Rehabilitative services and devices
  • Preventative and wellness services
  • Pediatric care, including vision and dental services

All plans purchased under the ACA and through Covered California will fulfill these requirements, but if you have private insurance it’s imperative that you make sure that your health plan matches or exceeds the ACA’s basic plan.

Avoid tax penalties by getting quality healthcare protection from Freeway Insurance. Freeway Insurance can help guide you to the most affordable California health insurance plan through the ACA during Open Enrollment or other health plans. Give us a call at (800) 777-5620 or get a free health insurance quote online today.

Ready to Get a Quick Quote?