What’s the Penalty If You Don’t Buy Health Insurance?

By Viji Sundaram, New America Media

To buy or pay the penalty?

That is the question that will confront many U.S. residents in the coming months, when open enrollment season begins for health insurance coverage, under the terms of the Affordable Care Act (ACA), also known as Obamacare.

ACA will be fully implemented on January 1, 2014, when most legal U.S. residents will be required to have “minimum essential health coverage” or make a “shared responsibility payment,” as the Congressional Budget Office puts it in regulations it rolled out last fall. That’s code for penalty.

The penalty “is enforced through a (Internal Revenue Service) tax code,” noted Karen Pollitz, a senior fellow at the Kaiser Family Foundation in Washington, D.C.

So when you file your 2014 tax returns, you will have to let Uncle Sam know what kind of health insurance coverage you have and what, if any, tax credit you are eligible for, unless you can claim you are exempt from buying health insurance.

Non-financial exclusions include:

• You are between jobs and without insurance for up to three months.

• It contradicts your religious beliefs.

• You are an undocumented immigrant.

• You are a member of an Indian tribe.

• You are in jail.

The financial exclusions for not having health insurance include having a family income so low that you don’t have to file an income-tax return, Pollitz said. Or your minimum essential coverage exceeds a certain percentage of your household income for the most recent taxable year. In 2014, that is 8 percent.

Coverage could take many forms. It could be a government-sponsored plan like Medicaid or Medicare, an employer-sponsored plan or a plan purchased on the individual market.

Applicable penalty

The individual one-time penalty under ACA in 2014 will be $95 per adult, or one percent of your income, whichever is greater. So say your annual income is $50,000, you’d pay $500. For every uninsured child, the penalty is $47.50. The family maximum is $285.

“Coverage is assessed on a monthly basis,” said Pollitz. “So if you were uninsured for six months, you’d owe half the otherwise applicable penalty.”

She said that the government has given a wide window – from Oct. 1, 2013 to March 31, 2014 – for enrollment this time, but from next year on there will only be a three-month window to sign up.

Will people take the gamble and skip coverage, hoping that their youth or good health will protect them?

If the state of Massachusetts, which passed a landmark health care law in 2006, which became the blueprint for the 2010 ACA, is any indication the number of people who will refuse to get some form of coverage will be low, Pollitz surmised.

In Massachusetts, she observed, “there’s a culture of coverage. Most people want to comply with the law.”

Indeed, within a year and a half after the law passed there, the majority of people signed up for coverage.

But when it comes to the ACA, an estimated 6 million people, who cannot claim legitimate exclusions, will likely take the gamble and remain uninsured in 2016, the government predicts.

Pollitz said there are no criminal penalties to those who violate the law, just a civil one. That could mean seizing your refund.

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May 9, 2013  Copyright © 2012 Eastern Group Publications, Inc.

Comments

8 Responses to “What’s the Penalty If You Don’t Buy Health Insurance?”

  1. Waldo Freeman on May 27th, 2013 9:56 am

    Currently my daughter is the only one with insurance in our household, and she has Title 19 of Iowa. With our low income we can not afford the cost of regular insurance and dont qualify for any state help becasue according to them we make to much money. The only reason that my child has coverage right now is because my wife and I werent married when she got pregnant, so she qualified for Title 19 for her pregancy and the child gets it for the first year of life. There is no way that we will be able to afford the cost of the insurance. We dont go to the doctor enough in a yr to meet the high dedutibles and the preimums a yr are out of our budget. The over all cost is too much, even for the Obamacare plans. My family is better off to just pay the penelty each year and pay the out of pocket cost when we do got to the doctor. If they could have make an insurance with 100% full coverage for health, dental and vison with no deductible for a cost of $400 a month. IT WOULD BE AFFORDABLE!!!! Insurance companies pocket to much money in premiums and dont payout on the insurance coverage. I as a US CITIZEN, feel I should not be forced to pay outradigous prices for insurance. If the federal goverment wants everyone to have insurance then do like Canada did and make it free for everyone that pays there taxes and has a job!!

  2. Mimi on May 29th, 2013 3:36 pm

    I agree with Mr. Waldo. Who put the government in a position to determine what each individual could afford, they don’t know what your expenses are? It’s great to say everyone should have insurance but even on a good salary for some people, your expenses surpasses what your income is. And what you have to pay out monthly in premiums depending on your age per year when you’re a person that goes to the doctor maybe once a year, how does that benefit me other than to add a burden to a budget I’m already stretched too thin on. How about people being given decent increases in wages, everything else is going up in cost of living except that? There’s no more freedom and liberty in this country, they just keep trying to take and take away from people!!!

  3. tonia on June 3rd, 2013 9:36 pm

    I agree with both comments. Why can’t we be like Canada? I have been under employed for the last 3 years. I make 10 bucks an hour part time because my job doesn’t want you to get full time so they can skip mandated taxes etc. Been applying for better paying jobs daily but can’t even get an interview in this crappy job market in Kansas. I can’t afford to buy decent food on the $800 I bring home a month. I’m living off of noodles and lunch meat because I can’t afford fresh fruit and veggies or real meat. Healthy not! Don’t qualify for any federal or state programs and can’t afford private insurance but need it so bad. And now the IRS is going to take money I don’t have to give!

  4. Lee on June 8th, 2013 10:50 am

    Recently know someone diagnosed with stage 4 cancer. Insured by spouse ( 80/20. Was informed to get off spouses insurance so he would be eligible for states assistance.
    Wouldn’t it make more sense for the doctors and hospitals to accept the 80 percent and the stat to aid in the 20 percent if needed? I feel it is not fair to taxpayers and that’s why our insurance is. Out of sight.

    We need to find ways to make insurance affordable for all, but I know people that own two homes but won’t pay for health insurance. Something is wrong with this system and I don’t think it’s up to the taxpayers to foot the bill for those that aren’t willing to work, or not willing to give up some luxuries such as trips, second homes etc. I know some people ( especially the elderly) really need aid with paying for prescriptions and things. Health Insurance has gotten out of sight!

  5. destinie wood on June 9th, 2013 12:41 pm

    What do they expect people that have pre-existing conditions to do? I have looked into getting health insurance but because i am bi polar, 80 percent of companies wont give me insurance. Then there is the 10 percent that wont cover me because i have 10 different medical problems and for the other 10 percent, they want like $400 a month with like a $1500 decuctible. I cant afford that especially when that doesnt even cover all the expenses. All this stupid healthcare is about is making more money for the government. They dont care about the poor people, just about making more money.

  6. Obamacare: Should I Take the Penalty Instead of Purchasing Health Insurance? | Eyes on the Dollar on July 24th, 2013 12:07 am

    [...] on January 1, 2014, and it requires everyone to have health insurance unless you meet one of a few exceptions. If you choose not to have health insurance, you will be subject to a tax penalty. If you [...]

  7. Angel on August 14th, 2013 9:16 pm

    I agree with Mr. Waldo. we should no allow the government to decide on what is better for us, they are just a group of people deciding for everyone. there is many things that we have to decide for our self. If any person do not want insurance or can not afford insurance coverage, we should no accept a fine from the government.

  8. RedMac on August 17th, 2013 9:43 am

    For me to buy insurance though work will cost me the same as my house note. I don’t know about any one else but am guessing that most of those who don’t have insurance cant afford a second house note. Like most I make enough to pay the bills I have now and can’t to take on more unless I work even more over time than I all ready do or take on a second job. What if gas prices sky rocket again?

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