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Your last chance to avoid the Obamacare tax penalty in 2015

If you didn’t have health insurance coverage in 2014 and have to pay a penalty as a result, the government is giving you a chance to avoid the same fate in 2015.

A health insurance special enrollment period (SEP) has been announced that begins March 15 and ends April 30.

During this time, eligible Americans will be able to buy health insurance, despite the fact that this year's open enrollment period ended on February 15.

avoid the obamacare tax penalty The program focuses on people who were unaware of the financial penalty until they discovered it while completing their 2014 taxes.

Despite all the outreach and education that has occurred in the past year, a lot of people remain in the dark about their obligation, says Anthony Wright, executive director of the health care consumer advocacy coalition Health Access California.

"Polls suggest that a significant part of the population doesn’t realize the tax implications of their health insurance status," Wright says.

For example, a late 2014 survey by Harris found that nearly half of Americans were unaware that they had to report their health insurance status on their tax returns.

Who is eligible for the 2015 special enrollment period?

To be eligible for this year’s special enrollment period, you must meet several conditions. They include:

  • Living in one of the 37 states with a federally-run health insurance marketplace.
  • Paying the penalty for being uninsured in 2014 as part of your tax liability. The fee for 2014 is $95 or 1 percent of their income, whichever is greater.
  • Not having health coverage for 2015 that was purchased through the marketplace.
  • Being unaware of the penalty for being uninsured or attesting that you didn’t understand it until it was too late.

The Centers for Medicare and Medicaid Services (CMS) launched a tool at to help you determine if you’re eligible for coverage during the special enrollment period.

Additionally, you can find out more by calling the federally-facilitated Marketplace Call Center toll-free at 1-800-318-2596. 

In a press release, CMS administrator Marilyn Tavenner says the federal government recognizes that this is the first tax filing season where consumers may have to pay a fee for not having health coverage.

"Our priority is to make sure consumers understand the new requirement to enroll in health coverage and to provide those who were not aware or did not understand the requirement with an opportunity to enroll in affordable coverage this year," she says.

Some individual states who have their own health insurance exchanges – such as Minnesota, California and Washington – say they also plan to offer consumers more time to purchase health insurance in 2015.

How the special enrollment period works

CMS estimates that between 2 percent and 4 percent of U.S. taxpayers will have to pay a fee for not obtaining health coverage in 2014.

avoid the obamacare tax penalty American adults who owe a fee are on the hook for $95 or 1 percent of their income, whichever is greater. The fee must be paid when filing taxes this year.

For 2015, the fee increases to $325 per adult, or 2 percent of income, whichever is greater.

More than 12.4 million applications for health insurance were submitted to the federally facilitated marketplaces between November 2014 and February 2015, according to the U.S. Department of Health and Human Services.

The special enrollment period is intended to help even more people sign up for health insurance in 2015 so they comply with the law and can avoid the penalty  

Individuals and families who enroll before March 15 will have coverage starting on April 1. They also will avoid having to pay a penalty for all the months they are covered during 2015.

However, the Obamacare penalty still applies for  the months you’re uninsured in 2015.

"The fee is based on income and the number of months you didn’t have coverage," says Joan Sheforgen, interim executive director of the Illinois-based Campaign for Better Health Care.

Obamacare penalty not as bad as feared?

Those who qualify for the 2015 special enrollment period already are paying a fee – for not having coverage in 2014.

However, Sheforgen says many people are finding the fee less severe than expected. 

The tax return filing threshold is the key feature used in calculating the 1 percent penalty that people pay for not having insurance. People who owe a fee – and whose penalty exceeds $95 – only have to pay 1 percent of their household income that is above this threshold.

For example, the tax return filing threshold for a single person under the age of 65 is $10,150. A single person who earned $40,000 in 2014 would be penalized at an income level of $29,850. At 1 percent, the penalty would be $298.50, rather than $400.

Also, if you’re uninsured for less than three months, you don’t have to pay a penalty at all.

Despite the fact that penalties may not be as bad as feared, being covered is better than being uninsured.

Wright says he’s hopeful that people will be more motivated to buy coverage over the next few weeks now that they fully understand the tax implications.

"I think there are a lot of people who would rather get the tax subsidy and be covered than accept the tax penalty and be uncovered," he says. 

"At the end of the day, you don't want to be in a situation where you are uncovered," Wright says. "When you are uninsured, you are one emergency away from financial ruin."



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