The Obamacare Loophole that Isn’t a Loophole

affordable care act loophole that isn't
No matter what your personal feelings are about the Affordable Care Act (commonly referred to as Obamacare), it’s important to understand how it works for your personal finances. Not fully understanding how it works, or making assumptions that you can do things that you really can’t, can come back to haunt your finances in a big way. A good example is a conversation that I had at a get-together I attended yesterday evening.

The topic of Obamacare came up and one lady proudly announced that she didn’t sign up for it because if she ever got sick, all she had to do was sign up for it right then, and she wouldn’t have any medical expenses. Ignoring the point that “she wouldn’t have any medical expenses” to focus on the more important issue that she couldn’t simply sign up for Obamacare when she got sick, I explained to her that she was mistaken. She looked at me like I was crazy, and the following conversation ensued:

“Insurance companies can’t deny me for pre-existing conditions anymore,” she said. “That means if I get sick, I can sign up even though I have a pre-existing condition. They can’t deny me.”

I explained that is was true that insurance companies are not allowed to deny coverage due to pre-existing conditions now, but that doesn’t mean that people are able to sign up for insurance coverage the day that they get sick. That is why there was an enrollment period and an enrollment deadline for this year. If you miss the deadline, you have to wait until the next enrollment period comes around (with some limited exceptions) before you can get insurance. This protects the insurance companies so that they don’t get overwhelmed with expenses from sick people who haven’t been paying into the system.

“Well, That doesn’t seem fair,” she said. “I should be able to get coverage whenever I want.”

I tried a different approach to explain why it is set up this way. I explained that if someone decides to drive a car without car insurance, and they get into an accident, they can’t purchase car insurance right then and there, and then be covered for the accident’s costs. The insurance company would never let anyone do that because they would go bankrupt. It’s the same general principle with Obamacare.

I wouldn’t be too concerned if this had been an isolated incident, but I’ve heard a number of people talk about this supposed “Obamacare Loophole” as the reason that they didn’t sign up for the Affordable Care Act.

I had another acquaintance say that if he ever got sick or had an accident, all he had to do is “pay a $95 penalty” for not having Obamacare and then he would have it. He explained that it would be easier and less expensive to wait until he did get sick, and then pay the penalty to enroll in the program.

Again, much like the lady, there was a mistaken belief that one part of Obamacare allowed for enrollment whenever he wanted. It’s true that if you don’t have health insurance, you’re supposed to pay a penalty ($95 or 1% of your income per month, whichever is higher), but paying that penalty doesn’t automatically enroll you into the program, or instantly give you health insurance coverage.

Both of these people thought they had found a supposed loophole that they could exploit, but both will have a huge financial wake-up call if they happen to get sick or have an accident this year. When they realize that they are going to be responsible for 100% of the medical bills, they will know how costly not understanding how Obamacare works can be to one’s finances. I truly hope that both are fortunate enough not to have anything major happen to them over the next year so they don’t have to find out how wrong their loophole assumption was.

Again, no matter what your personal feelings are about the Affordable Care Act, it’s important that you understand how it works so that you are able to adequately protect yourself and your finances. If you hear that there is an “Obama Loophole” of some type from a friend or acquaintance, don’t simply take their word for it. Do the research to understand the truth so that you don’t end up making a costly mistake.

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3 Responses to The Obamacare Loophole that Isn’t a Loophole

  1. Lee says:

    I’ve tried to explain these very same points to some of my coworkers, but they honestly believe the the can just “wait it out” or “pay the fine and then have insurance”, but as you’ve outlined it just doesn’t work that way. Not for auto, homeowners’ nor life insurance and certainly not w/health insurance (Obamacare).

  2. Jane says:

    And when they find out they can’t do what they’ve been told – incorrectly – do you think they’ll blame the folks who told them that? Not likely.

  3. Carol Ritchie says:

    Yes, they should be responsible for 100% their own bills if something happens. Does anyone really believe they would pay up?

    We personally know a 57 (yes, fifty-seven!) year old man who has zero insurance, thinks all doctors charge too much and said if something serious happened, he’d just pay $1.00 a month on the bill. Such an attitude……is it any wonder many people know exactly where the ER and/or Urgent Care’s are at and know that they can’t be turned away for care? And! have no intention of paying their bills??? Amazing

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