Affordable Care Act: Low-cost, catastrophic plan for the under-30 crowd

“Should I purchase a low cost health care plan?  I’m 26, unemployed, uninsured, single, and have no kids. I was laid off this year at the end of April and just recently did a contract job that lasted 3 months. So I haven’t had a steady income this year and don’t plan on taking a full time job in the next few months because I plan to move out of state in the next 5 months. Should I pay the penalty or get a low cost health care plan?”

In Flux

Dear In Flux,

You have your whole life ahead of you and just a small hassle over health insurance.  Ah, many people would trade places with you.

But enough of that.  You have options.

Option #1: Go uninsured and pay the penalty.

The penalty (or “tax”) is $95 or one percent of your income, whichever is greater.  The penalty, however, does not apply in several different scenarios.  For example, if the lowest cost plan would take more than 8% of your income, you escape the tax.  If you earn less than the tax-filing minimum (just under $10,000 for a one-person household), you also get off scot-free.  Even if the penalty applies, the IRS is not empowered to force you to pay it.

The penalty is not a huge reason for you to buy insurance, in other words.  The insurance companies complained about this, in fact, because people won’t get “hurt” enough to be motivated to buy insurance.  The real reason that you might want insurance is to pay your medical bills if a piano fell out of a window and onto your head or something else terrible happened.

Which brings us to . . .

Option #2: Buy a low-cost plan.

Since you are under age 30, you are allowed to buy a catastrophic plan.  These plans have much higher deductibles (the amount you pay before the plan starts paying).  This would be cheaper than a more generous plan.

You might feel that you cannot afford to pay the $2,000 or $3,000 deductible.  Therefore, why bother?  Someone – perhaps your Mom or Dad– might be inspired to keep you alive and help you pay the deductible.  Or you can work out a payment plan with the hospital or doctor who removes the A sharp key from your skull.

As long as you do not have access to an employer’s group plan, you could get help to purchase this catastrophic plan.  The subsidies are based upon your income.  To get these subsidies, you have to go to the state’s insurance exchange.  The federal exchange has had a lot of problems, but some individual states are rolling along just fine.  Check this map from the Commonwealth Fund to see whether your new state is running its own exchange.

There is still another option however . . .

Option #3: Apply for Medicaid.

The state you are moving to may be “expanding Medicaid”, which means that you may qualify even if you have no children and are not pregnant.  Look for your state on the Kaiser Family Foundation list.

Linda Riddell

About Linda Riddell
