How Do Coverage Gaps Work?
A gap in ACA (Affordable Care Act) is a period where you don’t have the minimum ACA coverage required by the law. Minimum coverage includes:
● Coverage you get from your employer
● Coverage you got through an individual or family plan
● Medicare Part A coverage/Medical Advantage plans
● Most coverage from Medicaid
You should also be aware that some health plans – like short-term health plans – are not considered as part of the minimum ACA coverage. If the period without coverage lasts three months, you face a penalty.
How Are The 3 Months Calculated?
How the IRS measures insurance gaps is a little odd. If you have coverage for at least one day of a month, that month does not count towards your three-month gap. For example, your ACA coverage ends on January 2 and you don’t have coverage at all in February or March. Because you were covered for one day in January, it’s like you were covered for the whole month, so only February and March count towards the three-month gap.
If you are uninsured from January 2 through February, March, and April, but get coverage for May, you are still held accountable for a penalty for March-April. Many people get confused and think because they got coverage by May, they won’t be penalized, but there were still three months where they without coverage. Assuming you are insured for the rest of the year (nine months in total), you will owe ¼ of the annual penalty.
How To Avoid Penalties
If you anticipate not having coverage for three months, you can avoid being penalized by qualifying for an exemption. There are several ways in which you might qualify, such as if you don’t have to file taxes (because your income is below the tax filing threshold) or you were denied Medicaid.
Misty Berryman is a Personal Benefits Manager at ColoHealth. Her aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Misty on her Bio page.