Penalties Will Crush Short Term Plans in 2016

[yankee466]

Why just do a 2 month STM is the optional penalty-tax is far lower than the annual premium for an Obamacare plan? This isn't advice, just a question.

My question was....if you only have a STM for two/three months....and ACA for 10/9 months....would there be a penalty at all? The STM plan is a fraction of the cost of ACA.

Else, can not find a 12 month STM that is decent....and YES, the penalty can be sizable in some of my client's cases. Just trying to avoid ANY penalty...and just make it a little better than 12 months of ACA....but I understand your question. Can not take the chance on a 6 month STM, and then not be able to renew. Although if you call the morons at HC.gov and tell them your STM plan is terminating, they will gladly give you a SEP and enroll you.....even though it is not how it is supposed to work.

 

[AllenChicago]

My question was....if you only have a STM for two/three months....and ACA for 10/9 months....would there be a penalty at all?

" However, if you went without coverage for less than three consecutive months during the year you may qualify for the short coverage gap exemption and will not have to make a payment for those months."

ref: The Individual Shared Responsibility Payment - An Overview

 

[AllenChicago]

January 25, 2016

This month, the IRS updated their Q&A for what qualifies, and doesn't qualify, as "Minimum Essential Coverage". Still no mention of Short Term Health Insurance, one way or the other.

See Q&A #5: https://www.irs.gov/Affordable-Care...he-Individual-Shared-Responsibility-Provision

 

[AgentStone]

STM question:

How many months can you go without an ACA compliant plan before you are subject to penalty? My quick reading seems to show 3 continuous months.


Last Gov't webinar I was in stated 2 mths without coverage before you are subject to penalty.

 

[RayNY]

STM question:

How many months can you go without an ACA compliant plan before you are subject to penalty? My quick reading seems to show 3 continuous months.


Last Gov't webinar I was in stated 2 mths without coverage before you are subject to penalty.

The law (https://www.law.cornell.edu/uscode/text/26/5000A , look at (e)(4)(A)) says "less than 3".

2 months is less than 3, so you can go 2 months and not be penalized. 3 months is equal to, not less than 3, so you would get a penalty for 3 months uncovered. I know that seems like a really stupid way of defining the rule, but we're all in agreement that's what it says and that's what it means.

Also worth noting, 1 day of coverage during a calendar month counts as being covered for that month.

 

[AgentStone]

The law (https://www.law.cornell.edu/uscode/text/26/5000A , look at (e)(4)(A)) says "less than 3".

2 months is less than 3, so you can go 2 months and not be penalized. 3 months is equal to, not less than 3, so you would get a penalty for 3 months uncovered. I know that seems like a really stupid way of defining the rule, but we're all in agreement that's what it says and that's what it means.

Also worth noting, 1 day of coverage during a calendar month counts as being covered for that month.

Good point, Ray... more on this
https://www.healthcare.gov/exemptions-tool/#/results/2015/details/short-gap


•If you had 2 or more gaps in coverage during the year you can claim this exemption only for the months of your first coverage gap. This is true even if both gaps are less than 3 months.

◦Example: You didn't have coverage any day in May or any day in November or December. You can claim this exemption only for May.

 

[G.Gordon]

I sold more ST plans this year than ever. The penalty was still less than half the annual premium.

 

[Softheon]

Hey check out our blog...this could help clear things up, "2016 Tax Forms: a breakdown for Health Plans and their Members" can be found on the Softheon website under resources. ...also a free webinar to discuss Form 1095-B on January 29th...

 

[hamben]

What penalty. I have found over 90%. Of the people I quote short term are exempt form the penalty because of the 8.05% affordability exemption. The premiums are so high if you do not get tax credits you are more than likely exempt. The bottom line is health people will always have choices. The unhealthy will not.

 

[AllenChicago]

What penalty. I have found over 90%. Of the people I quote short term are exempt form the penalty because of the 8.05% affordability exemption. The premiums are so high if you do not get tax credits you are more than likely exempt. The bottom line is health people will always have choices. The unhealthy will not.

The few Short Term Medical plans I've written are for people at the opposite end. They can easily pay $1,600 a month for the family, but refuse to do so. Had $10,000 HSA plans for $350 a month before 2014. Totally anti-Obamacare.

They check 1040's box #61 stating that they have Health Insurance and move along.