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Q. To avoid owing a penalty for not having health insurance next year, what’s the deadline for buying a plan?
A. The simple answer is March 31, but unfortunately it’s not that straightforward.
Starting in January, most people will need to have health insurance. If they don’t, they’ll owe a penalty amounting to $95 or 1 percent of the family income, whichever is greater. This fee will be collected when they file their federal income taxes.
But the rules allow people to have a short gap in coverage of less than three consecutive months before they get dinged with the penalty. So even though people are supposed to have insurance on Jan. 1, as long as they have coverage by March 31 they can avoid the fine.
In recent months, policy experts both in and outside the administration have offered different interpretations of when consumers would have to have purchased coverage on the state marketplaces, also called exchanges, to satisfy this deadline. Many experts maintained that people would have to buy an exchange plan by March 15 for coverage that begins April 1.
That date turns out to be incorrect, as the Jackson Hewitt Tax Service pointed out last week in a story published by The Associated Press. The coverage gap must be “less than” three consecutive months, not “up to” three months or “three months or more.” So to avoid a penalty, people must have coverage by March 31, not April 1. And to buy an exchange plan that starts March 1, consumers have to sign up by Feb. 15. (In general, consumers have until the 15th of any given month to purchase an exchange plan that starts on the 1st of the following month.)
“We just don’t want people to get caught off guard,” says Brian Haile, senior vice president for health policy at Jackson Hewitt.
An official at the Department of Health and Human Services confirmed the Feb. 15 signup deadline.
Procrastinators may have another option, however. Even though people must buy a marketplace plan by the 15th for coverage to begin on the 1st of the following month, carriers that sell plans outside the exchanges don’t have to stick to the same deadlines. They could choose to allow consumers to buy a plan much closer to the March 1 effective date, experts say.
This currently happens in some states that are already required to accept all insurance applicants regardless of their health, says Carrie McLean, director of customer care for online vendor ehealthinsurance.com. In some “guaranteed issue” states, a carrier may allow a consumer to apply and pay for a plan one day and request that it be effective the following day.
Looking ahead to next year, “most carriers are following the same [application] cutoff dates on and off the exchange,” she says. But nothing is set in stone, and “I wouldn’t be surprised ... if they might extend the cutoff to get more business.”
But there is a potential downside to buying a plan outside the exchanges. Consumers with incomes up to 400 percent of the federal poverty level ($45,960 for an individual and $94,200 for a family of four in 2013) may be eligible for subsidies to make coverage more affordable if they buy a plan on a state marketplace. Those subsidies aren’t available for non-exchange plans.