By Ryan Biehle, Policy Associate

You should get health insurance. No, really! There are a lot of reasons:
1. It will give you peace of mind to know you can get the care you need when you need it
2. It will save you money on those unexpected health bills like fixing a broken leg, which can cost over $10,000.
3. You’ll have access to free preventive services

We have all heard probably more than we would like to about Obamacare’s individual mandate that goes into effect starting January 1st, 2014. But what does the individual mandate actually mean for Coloradans? With some exceptions, consumers will need to have insurance or pay a penalty. If you go for longer than three consecutive months in 2014 without insurance, then you’ll owe a penalty when you file your taxes.

The majority of Coloradans already meet the requirements of the mandate through the insurance they have now. Insurance purchased in the individual market or through your employer, Medicare, Medicaid, Children’s Health Plan Plus, and TRICARE all provide sufficient coverage to meet the requirements. Student health plans also provide this coverage in 2014, but that may not be the case in 2015. We’ll get to that a bit later.

Exemptions from the Individual Responsibility Requirement
Some consumers will be exempt from the requirement to either purchase insurance or pay a penalty. Exemptions include:
• If they make less then $10,000 for an individual or $20,000 for a family
• If health insurance would cost more than 8% of household income
• Being a member of a federally-recognized Native American tribe
• Being an immigrant who is undocumented
• Being incarcerated
• Being certified by Connect for Health Colorado, our state’s new insurance marketplace, to have suffered a hardship preventing the purchase of insurance
• Qualifying for a religious exemption if you are a member of a federally recognized religious group that is conscientiously opposed to accepting insurance benefits.

Consumers who qualify for an exemption can either claim it on their federal income tax filings or get an exemption certificate from Connect for Health Colorado, depending on which exemption they claim. Individuals who make less than $10,000 and families that make less than $20,000 get an automatic exemption and they don’t have to file anything.

Student Health Plans
For students on their school’s health plan, their coverage is adequate for 2014. Starting in 2015, students will need to make sure their school’s health plan qualifies as adequate coverage. If it does not meet the minimum coverage level, they may end up paying the penalty. Student health plans, and all insurance plans for that matter, will be required to provide consumers with information that proves they had the necessary health coverage throughout the year.

How Penalties are Determined
A tax penalty can be determined in one of two ways: (1) a flat dollar amount, or (2) a share of household income, whichever amount is greater. This graphic shows what the penalty looks like over the next few years:

Regardless of which method is used, the penalty only applies if you are uninsured for more than 3 months back-to-back. To illustrate, let’s take the example of Max who is an individual that makes $30,000, doesn’t buy insurance in 2014 and doesn’t qualify for an exemption, He would be subject to a fine, which is either $95 or 1% of his income over $10,000. Since 1% of $20,000 is the greater number, he’ll owe that amount ($200 for the year in this example).

You’ll owe a penalty just for the months you go without insurance. Let’s say that Max goes without insurance for six consecutive months in 2014. The penalty he owes is pro-rated for those months and would be half the total for a year. So now his fine is $100. 

Not surprisingly, some families are concerned about the potential costs of any penalty. Fortunately, most people don’t have to worry because they either have insurance already or they’ll qualify for financial assistance to buy an affordable plan that fits their needs through the marketplace. Others will qualify for one of the exemptions mentioned earlier.

Nobody can ever predict when he or she will have an accident or develop a condition that requires significant medical attention, which could bankrupt you if you don’t have insurance. Health insurance can give you and your family the peace of mind to know that your health care needs are covered and you can see a doctor without unpredictable costs. You can start signing up for coverage October 1st at for coverage that will begin January 1st, 2014. 

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