Most of the employees that I work with are in a fortunate position to work for large companies that provide health insurance to their employees.  But many of the people that I talk with have friends and extended family members that are not covered by an employer-provided plan.  One area of confusion these days is what happens when you cannot afford health insurance.  Unfortunately, the answer to that question is a little complicated and it depends on a few important factors.

In case you’ve been living in a cave for the past few weeks, it’s probably no secret that the health exchanges created under the Affordable Care Act (a.k.a. “Obamacare”) are now officially open for business.  There has been a great deal of positive and negative publicity regarding the rollout of the new health exchanges.   This is the most significant change to our country’s health care system since Medicare was launched back in 1966.

Despite this landmark and relentlessly debated legislation, a recent survey indicated that nearly two-thirds of the uninsured have not made up their minds if they will actually purchase health insurance by the January 1, 2014 deadline.  This indecision in many cases is linked to confusion about eligibility for federal tax credits to help make premium payments. With financial constraints a potential roadblock for many uninsured Americans, it’s important to understand who will benefit the most from health care reform attempts through Obamacare.  It’s also helpful to understand the potential consequences if you don’t have existing health insurance.

Here are some basic elements of the upcoming deadline to buy health insurance:

The Health Insurance Marketplace is designed for the uninsured and for those who have been denied coverage in the past. It also provides additional options for people with existing coverage to see if they are eligible for lower premiums or out-of-pocket costs for private insurance.  If you have existing insurance, there will not be a tax penalty.

Just be aware that the cost of your existing health plan may be changing soon if it hasn’t already so it is beneficial to comparison shop, especially if you have an individual or family policy. Around two-thirds of Americans under age 65 get employer-provided health insurance so they probably already have a good deal in place because the employer usually pays 70-80% of the costs on average.  It still helps to know what your options are should you leave your employer.

Enrollment through the health care exchanges began on October 1. Confusion remains regarding certain aspects of the health care law and technical glitches were reported when the exchanges officially opened.  The October 1st launch date was important but the most important date for individuals not covered by a health care plan is the deadline at the beginning of next year.  It’s important to note that the January 1, 2014 deadline is a soft one and you really have until March 31 to complete enrollment to avoid penalties.

Gain a basic understanding of the differences in premiums (and precious metals).  As with any type of health insurance, your monthly premiums will vary based on the type of plan coverage you have.  Just keep in mind that the best overall value isn’t always the plan with the lowest premium and depends on how much of the share of potential medical costs you are willing to assume.  The plans range from Bronze, Silver, Gold and Platinum with the finer precious metals resulting in higher costs.  The general guideline is that lower premiums will result in higher potential out-of-pocket costs.  Higher premiums equal lower potential out of pocket costs.

The penalties start small and increase on a tiered scale until 2016.  The majority of Americans must have health insurance by the end of March 2014.  This is something that must be reported on your income tax return.  For better or worse the IRS, is tasked with administering the health care law.  For more information on the tax aspects of Obamacare visit

Uninsured adults pay either a flat fee penalty or a percentage of their income (whichever is greater). Here are the tax penalties.

2014- The flat fee penalty is $95 per adult and $47.50 per child up to the maximum amount of $285 per family.  The alternative is the penalty could be 1% of family income.

2015- The flat fee penalty is $325 per adult and $162.50 per child up to the maximum amount of $975 per family.  The alternative is the penalty could be 2% of family income.

2016- The flat fee penalty is $695 per adult and $347.50 per child up to the maximum amount of $2,085 per family.  The alternative is the penalty could be 2.5% of family income.

Early retirees will have more options when leaving the workplace prior to age 65.  For those planning on retiring prior to reaching the Medicare eligibility age of 65, the guaranteed insurability feature of the Affordable Care Act provides added flexibility.  Here is a Forbes blog post that outlines what the new health care law means for early retirees.  If you are already on Medicare, your job is easy and you can ignore the focus on the new exchanges as the health care law doesn’t impact how you choose a Medicare plan or supplemental policy.

Don’t expect the debates regarding the long term viability of Obamacare to go away anytime soon.  Will costs go up or go down?  So many other questions remain but the reality is that if you or someone you know does not have health insurance coverage, they may be subject to tax penalties going forward.  It pays to be proactive with your health care planning.