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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Penalty to Extend Blue Shield Coverage to March 31?

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Question: I have been told by Blue Shield that I will be able to stay in it until March 31 2014. The new Bronze HSA plan is 50% more expensive for almost identical coverage to me, so I plan to want to stay in the existing plan. However, as I read the IRS website, that means I could be liable to paying the “individual shared responsibility” penalty for the first three months of 2014, which at my income level would more than offset the premium savings. Can you please clarify whether I would be liable to the penalty or not?

Answer: No penalty. You get transition relief from the shared responsibility payment because your coverage ends in 2014. The transition relief begins in January 2014 and continues through the month in which the 2013-2014 plan year ends, March 31st in your case.


“(4) Months during short coverage gaps (A) In general Any month the last day of which occurred during a period in which the applicable individual was not covered by minimum essential coverage for a continuous period of less than 3 months.” The HHS rule states it this way: “Individuals will not have to make a shared responsibility payment if coverage is unaffordable, if they spend less than three consecutive months without coverage,”

Yes, politicians and bureaucrats are idiots and the Tax Court and Supreme Court will probably have to rule on this, too. And looking at Congressional intent will be the key. Were taxpayers going to be “fined” for going two months and a day without health insurance, or was the concern that they not be insured more than three consecutive months, since the law says nothing about EXACTLY three months?

I think your reading of this part of IRC 5000A is too narrow. If it weren’t so, I don’t think the IRS would have allowed open enrollment to the end of March 2014.

Besides, the IRS is not going to be looking over everyone’s shoulder to see who is covered and who is not. They have no mechanism other than self-reporting to know who is insured and when or for how long. So does this mean that they will petition Congress for more access to our Protected Health Information? This could become another hotbed of political turmoil.

It’s kind of like the IRS rule for holding assets subject to capital gains tax. You pay a higher tax rate on something held “less than one year” than what you hold “more than one year” but according to a strict reading of the IRC, you cannot hold something exactly one year, because the holding period begins the day after one acquires property. To buy something at midnight on January 1 and dispose of it on January 1 the following year does not count as one year. But if you sell it on January 2, you’ve held it more than one year.

Or like qualifying for Social Security Disability with its “five full months” of elimination period. You are only disabled for a full month if you are disabled continuously beginning at the first moment of the first day of a mon/th and continuously disable past the last day of that same month.

@MaxHerr Concerning the “three months without MEC” for April-June point, I believe you are referring to relief for a “short term gap”. However, the IRS regulations state that a “short term gap” must be “LESS THAN” three months to avoid penalties. Since the regulations also state that you are considered covered for any month in which you have even one day’s coverage I believe “less than” in this context means two months: in other words you can only have two months gap in coverage to qualify for a short term gap exemption. A shame the legislation and regulations are so poorly written.

Additionally, the penalty only applies if you go beyond three additional months without “minimum essential coverage”, so you could remain uninsured after March 31 and until June 30, without incurring the penalty. But without “MEC” on July 1, you will face the penalty prorated on a monthly basis for the actual number of months without coverage, which would extend back to April 1, exposing you to 75% of the $95 penalty (up to $213.75) or 75% of 1% of your MAGI for the year, whichever is greater.

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