The Affordable Care Act requires all people who can afford it to take responsibility for their own health insurance by getting coverage or paying a penalty. For some, this new expense can be burdensome. Fortunately, if you qualify, resources are available to help you pay for the expense of purchasing health insurance.

If you choose not to purchase insurance, you will be penalized and have to pay a fee. In coming years, the penalty will begin to increase, growing more and more costly. Here, you can find out how tax credits may help you purchase health insurance and how you can avoid an expensive fee. 

What is the Marketplace?

The Health Insurance Marketplace is a website where you can apply for and purchase health insurance. The Marketplace is also called the Exchange. Some states have created and operate their own state-based exchanges. Other states are leaving that responsibility to the federal government. However, everyone begins his or her search for health insurance at the same place, www.healthcare.gov.

To find health insurance coverage, you will apply for insurance at the Exchange when the open enrollment period begins on October 1, 2013. Your application will be processed, and you will learn which insurance plans you are able to purchase. You will also find out if you are eligible for discounts, tax credits, or lower out-of-pocket costs. The application can also tell you if you qualify for Medicaid, a health insurance plan for low-income individuals and families. 

What financial assistance is available?

The Affordable Care Act provides a tax credit to help families purchase health insurance coverage. This tax credit is called the Premium Tax Credit. The credit can be used as an advance payment and can help lower your monthly premiums. If you qualify for this tax credit, you can choose how much of the credit to apply to your monthly premiums. You can also wait to claim your Premium Tax Credit until you file your income taxes in 2015. 

When you file your income tax return, the Premium Tax Credit will be included as part of your filing. If you are due a higher tax credit than you received, you will get further credit once your income taxes are filed. If your tax credit was more than what you should have received, you will have to repay a portion of the tax credit.

What is the penalty for not purchasing insurance?

If you do not purchase health insurance during the open enrollment period, you may have to pay a penalty starting in 2014. If you have insurance through your employer or another source, you do not have to buy additional coverage. You just have to prove that your insurance meets the minimum requirements.

The penalty in 2014 is 1 percent of your yearly income or $95 per person for the year, whichever is higher. The penalty increases every year.

Additionally, if you do not purchase insurance once the Marketplace is open, you will be responsible for all health care costs you incur. You will not be eligible for bankruptcy or financial aid related to your medical bill costs.

How do the penalties change in the future?

In 2015, the penalty for an uninsured adult is $325. The penalty for an uninsured child is $162.50. The penalty for a family will be $975 or 2 percent of the family income, whichever is greater. 

In 2016, the penalty for an uninsured adult is $695. The penalty for an uninsured child is $347.50. The penalty for a family will be $2,085 or 2.5 percent of the family income, whichever is greater.

How much insurance do I have to buy to avoid a penalty?

To avoid a penalty, your health insurance plan must meet the “minimum essential coverage” threshold. All of the insurance policies provided through the Exchange meet this requirement. 

What insurance plans do not meet this requirement?

You may still face a penalty if one of the insurance plans below is the only health insurance plan you have:

  • Vision or dental insurance
  • Workers’ compensation insurance
  • Insurance coverage that only pays for treatments related to a specific condition or issue
  • Discount medical service plans

Who does not have to pay the penalty?

You may not be responsible for the penalty if you are in one of the following circumstances:

  • You are uninsured for less than three months in a year.
  • Your application reveals you have very low income and cannot afford insurance premiums.
  • Your income is so low you are not required to file a tax return.
  • You qualify under the new income limits for Medicaid but your state has not accepted the Medicaid expansion.

If you file for health insurance coverage in the Marketplace, your results will indicate any waivers or financial assistance for which you qualify.