I know the individual mandate permits a short gap in coverage of less than three months per year. What if I’m uninsured for the last two months of this year and first two months of next year?

Q. I know that the individual mandate allows for a gap in coverage as long as it’s less than three months in duration. But what if I’m uninsured for the last two months of this year and also the first two months of next year?

The Insider’s Guide to Obamacare’s Open Enrollment offers time-saving strategies for selecting coverage during open enrollment. (Click the image for a free download.)

A. You would be assessed a penalty for being uninsured in the coming year, but not for the year that’s ending (more details in this document on page 53654). The end date of a period without health coverage is never later than December 31, even if you remain uninsured after that date. So for the year that’s ending, your uninsured period would be counted as two months (November and December) and would be exempt from the shared responsibility provision because it’s less than three months.

But the start date for an uninsured period begins when you become uninsured, even if that date is prior to January 1. So for the upcoming year, your uninsured window would be counted from November of the prior year, and would include a four-month period.  Thus, you would not qualify for the exemption for a short gap in coverage.

However, your prorated penalty for the new tax year would only apply to January and February, since November and December were in a prior tax year.  Thus, your penalty would be one-sixth of the total penalty you would have paid if you had been uninsured for the full year (you can use this penalty calculator to get specific numbers).

The purpose of the shared responsibility provision – or individual mandate – is to make sure that as many people as possible are in the health insurance pool at all times, and to avoid the adverse selection that would arise if people waited to enroll in a health plan until they were in need of care (open enrollment windows are the other mechanism that prevents adverse selection).

From that perspective, a four-month gap in coverage is deleterious to the overall goals – hence the penalty – even if it happens to span across two calendar years.

It’s important to note that the regulations count a person as having health insurance for a given month as long as coverage is in force for at least one day of the calendar month. So if your plan ends on October 2, you would not be assessed the shared responsibility penalty for October, even though you’d be uninsured for most of the month.

Although a gap in coverage that spans two calendar years is still possible, it’s less likely now that open enrollment in the individual market is shorter than it used to be. It now ends in December, with all plans effective January 1. People who are starting a new job with coverage effective later in the year, or who experience a qualifying event and enroll after the first of the year might run into a situation where they have a gap in coverage that spans two calendar years. But people who use the individual market’s open enrollment period can no longer encounter this scenario.

from healthinsurance.org http://ift.tt/2zMjfUf