This requirement for minimum essential coverage (MEC) under the Affordable Care Act applies to smokers and nonsmokers alike. If you're not covered by an employer's health plan and are a smoker, you can go to the health care marketplace to find MEC. If you're still unable to comply, you may have a penalty applied.
Minimum essential coverage
For tax years 2014 through 2018, the Individual Shared Responsibility provision of the Affordable Care Act makes you responsible for having minimum essential coverage, or MEC, in health insurance. Otherwise, you need to be eligible for a health care exemption, or you could pay a penalty when filing your income tax return for these years.
MEC is the mandated responsibility of every individual and is defined by the Internal Revenue Service as:
- A qualified health plan purchased in the health insurance marketplace
- Employer-sponsored coverage including COBRA
- Self-insured plans and retiree coverage
- Medicare Part A and Advantage plans
- Most Medicaid offerings
- Children’s Health Insurance Program
- Coverage offered to Peace Corp volunteers
- Various veteran’s health coverage
- Most TRICARE coverage
- A variety of self-funded and state high-risk pools
There are some exemptions to this mandate, including being unable to afford MEC due to financial hardship. Under this provision, a smoker who can prove hardship may not have to pay a penalty.
Additional health costs for smokers
Under the ACA, no one can be refused coverage for pre-existing conditions. However, it does allow insurance companies to charge 50 percent more for smokers' premiums. Smoking is considered any use of tobacco four times or more in a single week within the past six months.
Insurance companies justify the higher premiums by citing the health care costs and lost productivity every year from smoking. States can step in and mandate a lower surcharge or none at all, although only seven states have waived it: California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island, Vermont as well as Washington, D.C.
Smokers who can’t afford their higher premiums might choose to go without coverage and pay the tax penalty instead.
From 2014 through 2018 anyone who chooses not to pay for the cost of health insurance premiums, a penalty will be levied in one of two ways; the individual must pay whichever one is higher.
The first one is a charge of 2.5 percent of the annual household income above the tax filing threshold. The maximum penalty charged is the average premium for a bronze health plan.
The second way is a penalty of $695 per adult for the year and $347.50 for anyone under 18 years old (2018 amounts). This will be levied at the time income taxes are filed. The smoker and their family would still have no health coverage and these penalties increase significantly for each year without coverage.
Beginning in 2019, the penalty for not having Minimum Essential Coverage goes away.