Health Insurance Lapses May be Costly


May 2015


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Individuals who lost their health insurance coverage in 2014, or didn’t have insurance, may have been in for a surprise when filing taxes. Under the Affordable Care Act (ACA), there are potential monetary penalties for people without health insurance. Even if a person had coverage through part of the year, if it lapsed at any point for more than two months, he or she may be assessed a fee based on income level and number of dependents.


However, a person may be exempt from the coverage requirements if any of the following are true:


- The individual is part of a religion which is opposed to acceptance of benefits from a health insurance policy.


- The person is incarcerated.


- He or she is a member of a Native American tribe.


- The individual’s income is below the threshold for filing a tax return ($10,000 for an individual, $20,000 for a family)


- The person has to pay more than 8 percent of his or her income for health insurance, after taking into account any employer contributions or tax credits.


- The person is not legally present in the U.S.


As part of the initiative to make sure everyone gets health insurance, the penalties will increase each year. For 2014 taxes, according to the White House, the penalty is either one percent of a person’s yearly household income, or $95 per person ($47.50 per child under 18), whichever is higher. As calculated by the IRS, the maximum penalty amount is $2,448 per individual, or $12,240 for a family with five or more children.


This year, if a person still doesn’t have coverage, the penalties will be either two percent of yearly income, or $325 per person (162.50 per child under 18), whichever is higher. The maximum penalty will be the 2015 national average premium for a “bronze plan” as calculated by the government.


To avoid these penalties next year, a person must apply for and maintain health insurance coverage throughout the year. This insurance can come from a variety of sources, including coverage provided by an employer, a plan that is purchased independently, Medicare or Medicaid, TRICARE, or the veterans’ health plan. There is no penalty for a short lapse in coverage of two months or less.


For Seafarers, another option is continuation coverage purchased through the Seafarers Health and Benefits Plan (SHBP) under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA allows employees (in this case, Seafarers) who have experienced what the act calls a “qualifying event,” (such as a change in employment status, divorce, death or reaching age 26) to temporarily extend their health coverage until they reestablish eligibility under the SHBP.


According to the ACA, “COBRA continuation coverage qualifies as minimum essential coverage. This means if you have COBRA coverage you don’t have the pay the fee that people without coverage must pay.”


Seafarers can get more information about COBRA by contacting the SHBP at 1-800-252-4674 or online at Look for the Summary Plan Description Guides that are posted in the SHBP area of the Member Benefits and Resources section.




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