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If health insurance rates keep going up, when does coverage cease to be affordable? The answer to that question depends on a number of factors and can be fairly subjective. However, we can look at how the Affordable Care Act (ACA) defines affordability for guidance.
The healthcare reform law provides two affordability thresholds, depending on whether the coverage is offered through an employer or not. (Please note: The numbers listed below are for 2017 and are subject to change in 2018.)
Under the Affordable Care Act, HealthCare.gov defines affordable coverage as "A job-based health plan covering only the employee that costs 9.69 percent or less of an employee’s [total] household income."
Affordability is determined by the lowest self-only plan the employer offers (i.e., covers only the employee, not dependents) as well as the employee’s share of the premium. Those who are eligible for an affordable job-based plan are not eligible for premium tax credits to buy coverage from a state-based or federally facilitated health insurance exchange.
Individual health plan premiums are considered unaffordable if the lowest-cost Bronze plan available through your state-based or federally facilitated exchange (healthcare.gov) is more than 8.16 percent of your household income, including any premium tax credit subsidy you receive. If you believe you (and others on your tax return) qualify for an affordability exemption under the ACA, you must fill out an exemption application; directions are available at HealthCare.gov.
Of course, it is still possible you could feel like health insurance is too expensive for you and your family even though the ACA defines it as affordable for someone in your situation. Then what do you do?
You don’t have to navigate this alone!
A.) Meet household income guidelines, and
B.) Buy health insurance from a state-based or federally facilitated exchange
Those below the subsidy threshold may qualify for Medicaid. Those above it may have to pay their monthly premium entirely on their own. The law does extend exemptions to certain individuals, which means they would not be required to have minimum essential coverage and would not owe the shared responsibility payment (i.e., Obamacare penalty) for going without.
The term minimum essential coverage encompasses more than major medical (i.e., Obamacare) plans. Other coverage types may fulfill the law’s individual mandate (i.e., shared responsibility provision), but eligibility criteria related to income, age, and immigration or military status may apply.
Some examples of minimum essential coverage that is not major medical insurance include Medicare, Medicaid, TRICARE, the Children’s Health Insurance Program (CHIP), and Refugee Medical Assistance.
In addition to the affordability exemption mentioned earlier in this article, the healthcare law also includes a general hardship exemption related to homelessness, eviction, foreclosure, domestic violence, death of a close family member and unpaid medical bills.
How you obtain an exemption varies by circumstance. Visit IRS.gov for more details on health insurance exemptions and application requirements. The IRS also has an online interview that helps you determine your exemption eligibility.
If you do not qualify for an exemption and go without minimum essential coverage for more than a single period of three months in the calendar year, you could owe the individual shared responsibility payment tax penalty.
If you don’t have minimum essential coverage (or do have it and struggle to afford the deductible and out-of-pocket expenses) you may want to consider additional health benefits. The products listed below are available year-round—they are not considered minimum essential coverage.
Short-term medical plans offer a temporary coverage option for those who are in between ACA-compliant plans. Policies last for 30 to 90 days and include benefits for unexpected medical expenses such as hospital room and board, emergency room treatment, surgical services and more.
Supplemental coverage such as Metal Gap or Metal Gap 2, which are available through HealtheDeals.com, is an option for those who already have minimum essential coverage and want benefits that can help minimize the financial impact of out-of-pocket healthcare expenses. These plans pay lump-sum benefits when a covered accident or illness occurs; that payment may be used for medical bills, household expenses, car payments and more.
Fusion is a product that pairs short term medical with a fixed-benefit indemnity plan. Because short term plans offer a relatively large maximum benefit (e.g., $2 million, depending on plan selection) for serious injury or illness and fixed-benefit indemnity plans offer daily benefits for covered illnesses and injuries, this combination provides coverage for small claims as well as bigger ones. Once the short term policy expires, you can keep the fixed-indemnity coverage—even after you obtain minimum essential coverage.
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While most of us don’t yet know if and how our current coverage will change for 2018, it is smart to start thinking ahead and preparing for open enrollment now. Take stock of your 2017 health insurance, and consider what you want and need out of your next plan. Be ready to shop around, whether or not your premium goes up in 2018.
Work with a licensed professional to find coverage that suits your healthcare needs and household finances. Call the number at the top of your screen to speak with a producer who can help you find on- and off-exchange Obamacare plans as well as temporary and supplemental coverage. You can also find local help with Agent Finder.
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Originally published August 19, 2016. Updated and reviewed September 14, 2017.
 HealthCare.gov. “Affordable Coverage.” Accessed Sept. 13, 2017. https://www.healthcare.gov/glossary/affordable-coverage/
 HealthCare.gov. “How to Claim an Exemption Because 2017 Marketplace Health Coverage Is Considered Unaffordable Based on Your Projected Annual Household Income.” Accessed Sept. 13, 2017. https://www.healthcare.gov/exemptions-tool/#/results/2017/details/marketplace-affordability
 Internal Revenue Service. “Individual Shared Responsibility Provision—Exemptions: Claiming or Reporting.” Last reviewed or updated Feb. 2, 2016. https://www.irs.gov/affordable-care-act/individuals-and-families/aca-individual-shared-responsibility-provision-exemptions