You purchased Health Insurance during Open Enrollment or had a qualifying event allowed you to purchase it during a SEP (Special Enrollment Period). That’s great, but now you are thinking about dropping it . . . . .
Here is what will happen:
First of all, you will no longer have health coverage — well, that should not be a surprise. What you might not know is that dropping your coverage will trigger the federal tax penalty. Under the Affordable Care Act, for those who do not carry health insurance, the penalty is included in their 2015 Federal Tax Return. Also, you will not be able to reinstate or replace your qualified coverage until next Open Enrollment Period. If you do not have a qualified health insurance plan in 2015, you may have to pay the tax penalty of the greater of these two amounts,
- 2 percent of your yearly household income
- Or $325 per person for the year ($162.50 per child under 18) with a cap of $975 for families
If you have already canceled your health plan you may still have an option of enrolling in a short-term plan. This will not count as a qualified health plan and save you from the possibility of paying a tax penalty; however, it can cover you should the unexpected happen and give you some financial peace of mind.