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What’s that Obamacare deadline?

By Jay MacDonald · Bankrate.com
Friday, December 6, 2013
Posted: 6 am ET

Now that more uninsured Americans are able to log on to the main Obamacare health exchange website, the reality is setting in for many that they need to acquire a plan in the near future or suffer a tax hit on their 2014 federal income tax.

But what was that deadline again?

Delays, delays

The confusion is understandable given the postponements to the Affordable Care Act, which, among other things, delayed the mandate for large employers to offer coverage and the debut of the Small Business Health Options Program, or SHOP, online exchange until 2015.

Conventional wisdom has long held that the uninsured must have coverage in place by Jan. 1 or face a penalty of 1 percent of their annual household income or $95 per adult, whichever is greater. That presumably fueled much of the scrambling to get the exchanges operational following their disastrous debut Oct. 1, and it helps explain why health officials pushed the application deadline for individual coverage to Dec. 23, from Dec. 15. That's for policies that will take effect on New Year's Day.

But, as Kaiser Health News recently observed, "unfortunately it's not that straightforward."

New Year's? Or April Fools'?

That's because the rules surrounding the "individual mandate" allow consumers to have a gap in health insurance coverage of up to three consecutive months before the IRS places them on its naughty list. That, in turn, has been widely interpreted as giving the uninsured until April 1 to land a policy and avoid the tax hit.

However, the people at Jackson Hewitt Tax Service took issue even with that recently. Technically, they said, the law states that the coverage gap must be "less than" rather than "up to" three months, meaning the uninsured must have insurance by March 31. Perhaps coincidentally, that coincides with the end of the inaugural open enrollment period for the new exchanges.

Furthermore, Jackson Hewitt pointed out that in order to ensure that coverage is in place by the end of March, the application really has to be submitted by Feb. 15, according to standard health insurance practices. Even the Department of Health and Human Services agreed with that clarification, so the administration announced in late October that anyone who merely applies by March 31 will avoid the mandate penalties.

Alternative to the exchanges

Remember, if you need insurance to satisfy the health law, another option exists besides the Obamacare marketplace: You could purchase coverage on the private individual market, meaning outside of your state exchange. Insurers have been known to put a policy in place within two weeks, and in some states overnight, though it's unwise to push it.

While you may sneak in under the tax penalty deadline via the private market, doing so could cost you, as the advance premium tax credits and out-of-pocket subsidies designed to make health care affordable for lower-income consumers are not available on the private market.

Wish we had the same wiggle room for our holiday shopping!

Follow me on Twitter: @omnisaurus.

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