Penalties for Not Having Health Insurance Set to Rise in 2015
When Congress passed the Affordable Care Act in 2010, one of the controversial aspects of the new law was its requirement that all Americans register for health insurance. The so-called “Individual Mandate” – designed to encourage young, healthy people into the marketplace to drive down premiums across the board – imposed a fine on those who did not sign up. That fine is set to rise significantly in 2015.
Fines for the Uninsured
2014 was the first year in which individuals faced fines for being uninsured. Administered through the Internal Revenue Service, under the umbrella of the congressional authority to collect taxes, the fines were levied against all those who declared themselves uninsured on their 2014 income taxes. The fines were then taken from those individuals’ tax returns. In 2014, the fine was either a $95 flat rate fee, or 1% of household income above the income tax threshold, whichever was greater. A person may be exempt from the fine if they qualify for one of about 30 exemptions, which are mostly designed to alleviate financial hardship.
Costs Set to Rise in 2015 and Beyond
The penalty for being uninsured is predicted to triple in 2015. Whereas the flat rate fine in 2014 was $95, the 2015 rate will be $325 or 2% of income. The projected average fine in 2016 could be around $1,100. These rising fines could have a significant effect on middle class families, who make too much money to qualify for the flat rate but not enough to fit either the cost of insurance or the income-based fine into their budgets. In theory, as the fines increase, more people will opt into the marketplace rather than pay the fine, and those people will help drive down the price of insurance. At least in the short term, however, insurance costs, as well as the fines for being uninsured, are predicted to rise.
Of the 30 or so exemptions, most are for financial hardship. Knowing which exemptions exist and which an individual might be eligible for is no easy task. Many people will qualify: H & R Block predicts, based on congressional analysis, that four million people will pay a fine, while 26 million will qualify for an exemption. But will they all be aware they qualify? Despite new applications offered by tax companies to help check for exemptions, it is possible many will pay a fine, even if they could have been exempted. This is only one example of the lack of awareness surrounding the ACA and the fine.
Awareness or the Lack Thereof
One of the major concerns about the ACA is a general lack of understanding and awareness about some of its most significant aspects. Many people are unaware of the upcoming deadline for signing up for coverage in 2015, February 15th. If people do not sign up for insurance before this date, their policies will not come into effect in time to cover the whole year, and they may possibly face fines. Another problem is that many people are unaware of the possibility of a fine altogether. While they may know something of the Individual Mandate, or that the new health care law is designed to cover as many people as possible, they do not necessarily know the specifics of the fine levied against those who do not sign up. Without the proper information, many Americans could be unknowingly facing the increased 2015 fines.
In April 2014, 13.4% of Americans remained uninsured and in danger of being fined. In households with an income of less than $34,000, nearly one in four lacked coverage. While this is a decline from 17.1% uninsured in 2013, it still represents a significant portion of the American population, all subject to the ACA fine. The average American’s tax return is roughly $3,000, which makes the fine, especially at its new 2015 level, a significant cost. The Health and Human Services predict that nine to 9.9 million Americans will enroll in the ACA marketplace in 2015. Millions more, however, will remain uninsured, and pay a heavy toll.
The Affordable Care Act is intended to offer more insurance coverage to more people and is indeed succeeding; however, it is not without consequence. As the prices of some health insurance plans rise, some individuals and families are priced out of their former plans. As fines for being uninsured surge, Americans could be faced with the choice between a plan they can’t afford and a fine they can’t afford. Only with a full understanding of the ins and outs of the ACA, including important deadlines and possibly penalties, can Americans be sure they are getting the best deal and avoiding costly fines.
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