What is the penalty if I don’t buy health insurance?

Major provisions of the Affordable Care Act (ACA) have been in place since the beginning of 2014, however many employees and small business owners still wonder, “Do I have to buy health insurance in 2015?” and “What is the penalty if I don’t buy health insurance?”

This article answers common questions about the requirement to have health insurance and the penalty for not having health insurance.

 Do I Have to Buy Health Insurance If I’m Uninsured?

Most Americans are required to have health insurance, or pay a tax penalty if they don’t. This ACA rule is called the “Individual Mandate” or “Individual Shared Responsibility Fee” and started in 2014. Coverage can include job-based health insurance, individual health insurance, or insurance through a government program such as Medicaid or Medicare.

 What Is the Penalty If I Don’t Buy Health Insurance?

The penalty for not having “minimum essential coverage” is called the “Individual Shared Responsibility Fee.” This fee is either a flat fee or a percentage of household income, whichever is greater. The penalty increases over the first three years.

Year Flat Fee or Percentage of Income
2014 $95 per adult, $47.50 per child, up to $285 per family or 1% of family income minus federal filling threshold
2015 $325 per adult, 162.50 per child, up to $975 per family or 2% of family income minus federal filling threshold
2016 $695 per adult, 347.50 per child, up to $2,085 per family or 2.5% of family income minus federal filling threshold
2017 Adjusted Annually or Adjusted Annually


 Source: Affordable Care Act 101 

 Example of the Individual Shared Responsibility Fee:

Jean is single and earns an annual income of $40,000/year. Nancy went uninsured in 2014. At tax time, Jean is required to pay an Individual Shared Responsibility Fee. Jean will pay either 1% of income (minus the federal tax filing threshold) or $95, whichever is greater.

Jean’s annual income ($40,000) minus the federal tax filing threshold ($10,000) is $30,000. One percent (1%) of $30,000 is $300.

Since this amount is greater than $95, Jean will pay a $300 fee.

See more Individual Shared Responsibility Fee examples here.

 Does Everyone Who Is Uninsured Have to Pay the Fee?

You may not have to pay the Individual Shared Responsibility Fee if you are uninsured, and:

  • Are required to pay more than 8% of your household income for the lowest cost bronze plan.
  • Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.
  • Had one gap in coverage for less than three consecutive months during the year.
  • Won’t file a tax return because your income is below the tax filing threshold. In 2013, the tax filing threshold was $10,000 for individuals and $20,000 for a couple.
  • Are unable to qualify for Medicaid because your state has chosen not to expand the program.
  • Participate in a healthcare sharing ministry or are a member of a recognized religious sect with objections to health insurance.
  • Are a member of a federally recognized Indian tribe.
  • Are incarcerated.
  • Qualify for a hardship exemption.

If I Owe a Fee for 2014, How Do I Pay It?

If you go uninsured in 2014 and don’t qualify for an exemption, you will have to pay the Individual Shared Responsibility Fee to the IRS on your 2014 tax return. You will most likely need to submit your tax return for 2014 by April 15, 2015.

How Do I Prove I Had Coverage to Avoid Paying the Fee?

If you obtained insurance in 2014, you should receive a notice from your insurance provider by January 31, 2015 that describes your coverage status during the year to use with your tax return.