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ACA Treatment of Coverage Gaps

Short term coverage gaps and how they affect your Obamacare fine, if any, have been addressed by the US Department of the Treasury and the Department of Health & Human Services.

It’s important to understand how you can qualify for a Short Coverage Gap Exemption and at the same avoid any Obamacare penalties.

The One-Day Rule

If a person is enrolled in and entitled to receive health benefits under a plan identified as Minimum Essential Coverage for just one day in a full calendar month, that month is not included in the continuous period when applying the short coverage gap exemption. Technically, you only need to be insured for a single day in each month.

So coverage gaps do not apply to any month in which you had health insurance coverage for at least one day. Being uninsured for part of any month is considered fully insured for determining both an ACA fine or a coverage gap.

Straddle of 2 Taxable Years

Probably the most overlooked aspect of the law and how it is applied has to do with the use of a so-called ‘straddle’ to calculate an individuals’ number of uninsured months. This scenario is important to understand since many will unknowingly be penalized due to this little known ACA provision.

Some periods of being uninsured in the latter part of 2014, without any valid exemptions, which run into 2015 will be added to your 2015 coverage gap calculation.

Let’s take a closer look at this straddle by using an example scenario. Say you are without insurance in November and December of 2014. If you continue to be uninsured throughout January and February of 2015 you’ll have accumulated a total of 4 months towards your 2015 Obamacare fine.

Such a coverage gap, in future years, can creep up on unsuspecting taxpayers. This will come as surprising to many as people will assume they haven’t yet triggered a fine. If you expect to be without health insurance, particularly when it’s early on in any given year, be mindful of the straddle.

Treatment of Retroactive Coverage

The Affordable Care Act’s provisions do address retroactive coverage and how it applies to the Obamacare fine. Generally, unless retroactive coverage is provided, an applicant awaiting approval for enrollment isn’t covered until approval of the insurance application.

However, a special waiver may be applicable when an individual is unable to obtain coverage in a timely manner because of a lengthy approval process. Fortunately, Medicaid is known to be retroactive back to the time of an application.

Multiple Short-Term Gaps

Under normal circumstances, a short term coverage gap exemption applies to a continuous period without minimum essential coverage of less than 3 full months. The Treasury Department has indicated they’re referring to the first short-term coverage gap in an individuals’ taxable year.

Some people will have situations where they switch employers and/or circumstances preventing them from obtaining coverage in a timely manner. This can create multiple short-term coverage gaps which may accumulate to a total of more than 3 full months without coverage.

For such a situation, an exemption may be available though your exchange.