CMS Releases Official Guidance On Six-Week Delay In Penalty For Not Carrying Insurance

The Centers for Medicare and Medicaid Services (CMS) has issued formal guidance that individuals who purchase health insurance through a new health insurance marketplace by March 31, 2014, will not face a penalty for not being insured the first three months of 2014.

Short coverage gap. Starting in 2014, under the Patient Protection and Affordable Care Act (ACA), each individual is required to maintain health insurance, or pay a penalty, unless they qualify for an exemption. The “short coverage gap” exemption allows a person to go without insurance for no more than three months.

The ACA established an initial open enrollment period from Oct. 1, 2013, until March 31, 2014, for individuals to purchase insurance through the new health insurance marketplaces. For plan selections made between the first and fifteenth day of a given month, the coverage effective date is the first day of the immediately following month; for plan selections made between the sixteenth day and the end of a given month, the coverage effective date is the first day of the second following month. So, individuals who sign up for insurance after mid-February 2014 would not be covered until April 1, 2014, and thus exposed to the noncoverage penalty.

New guidance. Last week, an HHS spokesperson said that “some have asked whether consumers could face a tax penalty if they don’t enroll in coverage by Feb. 15th of next year. This is not the case. If you sign up for insurance by the end of March, you will not face a penalty.”

The new guidance from CMS states that “if an individual enrolls in a plan through the marketplace prior to the close of the initial open enrollment period, when filing a federal income tax return in 2015 the individual will be able to claim a hardship exemption from the shared responsibility payment for the months prior to the effective date of the individual’s coverage.” Further guidance on this exemption will be released in 2014.

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