Last week, the Obama administration extended the deadline for individuals to sign up for health insurance before facing tax penalties under the Affordable Care Act (“ACA”) to March 31, 2014. The announcement delays the tax provisions associated with the ACA and gives individuals extra time to purchase health insurance. The delay is a welcomed reprieve for individuals who have struggled to purchase health insurance amidst the failed launch of HealthCare.gov earlier this month.
In practice, an individual must sign up by the 15th of a given month in order for health insurance to start the first day of the next month. Therefore, to have health insurance in place by the March 31, 2014 Short Coverage Gap deadline, an individual would have to apply for insurance by February 15, 2014. If an individual applied for and purchased health insurance coverage between February 16, 2014 and March 31, 2014, he or she would be subject to penalties under the ACA.
Under the ACA and accompanying tax regulations, individuals are required to have health insurance coverage in place starting in 2014. After January 1, 2014, a penalty is imposed on any individual who does not have health insurance coverage for one or more months. However, individuals are protected from the ACA penalties during “Short Coverage Gaps”. A Short Coverage Gap is a continuous period of less than three months wherein the individual does not have minimally acceptable health insurance coverage. In effect, the Short Coverage Gaps allow individuals up to three months to obtain appropriate health insurance coverage under the ACA.
Open enrollment for health insurance coverage on the Health Insurance Marketplace / Exchange is from October 1, 2013 through March 31, 2014. Before last week’s announcement, the Short Coverage Gaps allowed individuals to avoid ACA penalties in the first quarter of 2014. However, it was possible for individuals to purchase insurance during the open enrollment period and still be subject to the ACA penalties. If an individual purchased health insurance that did not go into effect until after March 2014, the individual would incur a penalty for exceeding the Short Coverage Gap protection.
On October 28, 2013, the Center for Consumer Information and Insurance Oversight (“CCIIO”) released a Q&A regarding the extension of the deadline for individuals to sign up for health insurance before facing tax penalties under the ACA. In this release, CCIIO stated that “the duration of the initial open enrollment period implies that individuals have until the end of the initial open enrollment period to enroll in coverage through the new Marketplaces while avoiding liability for [tax penalties]”. As such, the Department of Health and Human Services is exercising its authority to establish an additional hardship exemption to provide relief for individuals who enroll in health insurance after February 15, 2014 but before the close of open enrollment for the Marketplaces. The hardship exemption can be claimed on an individual’s federal income tax return in 2015 without the need to request an exemption from the Marketplace.
It remains to be seen how the continued technological complications surrounding the Marketplace will affect the individual mandate. It is possible that future delays will be announced. In addition, it is likely that small businesses will see another delay later this week to the implementation of the SHOP. Previously slated to open on October 1st, small business enrollment in insurance products through the SHOP was delayed until Friday, November 1, 2013.
To find out more about the impact that the Affordable Care Act has on health care and your business, contact Health Care Department Chair Jonathan Raven at firstname.lastname@example.org or 517.377.0816, or our Employee Benefits Department Co-Chair Elizabeth H. Latchana at email@example.com or 517.377.0826.