Healthcare has been a hot topic for the last few U.S. Presidential elections and the issue doesn’t seem to be going away soon as the Republican-led Congress has recently introduced their plan to “Repeal and Replace Obamacare.” Or did they? While the legislation is still pending approval in Congress and, ultimately, the White House, many Americans are wondering if they will be hit with a tax penalty for not having insurance.

Will I have a tax penalty? Not exactly.

Under the current Affordable Care Act (aka “Obamacare”), there is an individual mandate that requires every person to have medical insurance coverage unless they qualify for an exemption based on religious reasons or financial hardship as two examples. Whether you qualify for an exemption or not, everybody is allowed two months of lapsed coverage to help account for changes in employment or insurance providers where you will not be penalized.

If you don’t have acceptable coverage, the IRS will levy an appropriate fine when you file your federal income taxes. In fact, employers and healthcare companies are now required to send a document to the IRS stating if you did or did not have adequate coverage for each month of the year.

Under Trump’s proposed healthcare changes currently being debated in Congress, the individual mandate is slotted to disappear, but, you can still be financially penalized.

Insurance Providers Can Levy a 30% Premium Increase

If the proposed changes are not altered, an insurance company can exercise the option to raise your premiums by 30% if you had healthcare insurance for less than 10 months in the previous year. Under the current ACA law, the IRS would assess a tax penalty. If the law changes, your healthcare provider collects the money instead to offset their operating costs.

So, you might no longer be paying a tax penalty because the Obamacare Individual Mandate is eliminated, but, you still might be paying a similar fee directly to the insurance company instead.

Marketplace Premium Subsidies Are Also Changing

Another proposed change is who receives premium subsidies. Currently, people that make less money can qualify for a monthly premium subsidy to help them afford a health care plan. For example, a person making $30,000 might receive a tax subsidy that reduces their monthly premium from $500 per month to $200 each month.

Under the Trump/Ryan proposal, larger subsidies will be given to older Americans instead of the poorest Americans. While senior citizens consistently have the lowest incomes because they depend on fixed income streams like Social Security, Medicare, and any retirement account to pay their bills, a lot of young people that once received a subsidy are in jeopardy of no longer receiving one and will either have to pay more for insurance or go without.

Summary

Trump’s proposed changes to Obamacare are still being debated in Congress and the legislation could stall or drastically change to be approved. For now, you will still continue to be penalized at tax time if you do not have adequate insurance. If the changes go into effect as is, the individual mandate will disappear, but, the insurance providers have the option to charge you a similar fee instead. Instead of writing the check to the government, it goes directly to the insurance company.

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