When the Affordable Care Act initially rolled out, the fine for not buying a health insurance plan was just $95 per person. Each year the penalty, which is the least popular measure of Obamacare, has slowly increased to encourage Americans to get healthcare coverage. In 2016, analysts predict the fine could actually total more than the annual cost of health insurance for some families. At $695 per person per household, and $347.50 per child, a family of four living on $65,000 a year and avoiding a health insurance purchase in 2016 could pay a fine of $2,085 on their income taxes if they do not qualify for a tax exemption. For individuals and families with income above tax filing thresholds that skip an insurance purchase, the IRS tax penalty is 2.5% of overall household income.
Will the higher fees encourage people to buy health insurance? The results are mixed. Studies have shown that individuals ultimately forego buying health insurance because of the monthly premium cost, and a percentage of those individuals will qualify for a tax exemption. However, during the first month of open enrollment, 1 million new consumers enrolled in a health insurance plan on the federal marketplace that were not previously customers. Did the threat of a fine incent those 1 million to enroll? Perhaps, for some.
About 7 million of the uninsured are eligible for tax subsidies from the marketplace. Of those 7 million, approximately 48% of them could buy a Bronze plan for nearly $0 a month, or for pay less for an insurance plan than the penalty they would owe for remaining uninsured. Kevin Counihan, CEO of the federal marketplace, also reminds the uninsured that each month counts. Having health insurance for just a few months of the year does not qualify as being insured to the Internal Revenue Service.
While finger-pointing at the uninsured for not having coverage is easy to do, there is still a gap in education and overall knowledge about the Affordable Care Act. A survey of uninsured found that 6 in 10 people had not even visited the health insurance exchange to investigate health plan options. And of those surveyed, 59% didn’t understand how tax subsidies work or didn’t cost assistance existed. Only 26% said increasing the fine for not having coverage would motivate them to buy a healthcare plan.
It pays to get up to speed on what the Affordable Care Act rules and regulations are, and if a tax credit to help pay for the monthly cost of health insurance makes a plan more affordable than paying a fine in one lump sum come tax time. Find out more about health insurance options by calling 877-626-1943.
The views expressed here are those of the author and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com.