What It Costs To Be Uninsured Under Obamacare

Healthcare, Taxes

Stethoscope on American FlagNew health insurance exchanges launch October 1st. Obama-approved coverage can be supplied through your job, Medicare/Medicaid or other public programs, or an individual policy. You can shop for a plan online via online health insurance “exchanges.” Those who don’t get insurance through work can shop for insurance for policies taking effect in January.

Those who don’t have insurance for themselves or their families in 2014 must pay penalties. But is everyone really required to buy health insurance?  Are the penalties worse than paying costly premiums? Who’s going to find out if one neglects to purchase a policy?

Who Won’t Have to Buy Health Insurance?

There are certain exemptions involved for those who can’t afford coverage. The requirement to have health insurance applies only to people who earn enough to have to file income taxes; that’s just under $10,000 this year for a single person under age 65. Medicaid will be available — in states expanding their Medicaid — to college or graduate students earning $15,000 or less as an individual.

If you spend more than 8 percent of your income on premiums, you get a waiver on the penalty for not having insurance.

How Will the Government Know You’re Uninsured?

People might drive without a license, and only get in trouble if they’re caught.  How, then, might the government find out you are uninsured?

Your income tax form will ask if you had health insurance.  Anyone you claim on your tax return must be insured, or you will be charged penalties for each person not insured. People who have insurance will get a certificate of coverage from their health insurers, which will provide information to be filed with your tax return as proof. If you owe penalties, they will be assessed on your 2014 income tax form that’s due April 15, 2015. If you don’t have to file a tax return, you’re exempt!

The Price of Not Having Health Insurance

The penalty for not having health insurance will be, at least for 2014, $95 per person or 1 percent of your taxable income — whichever is greater. It will go up in later years, of course; think $325 per person or 2 percent of taxable income in 2015, and $695 per person or 2.5 percent of taxable income in 2016.  While this could be hard to swallow for some, it might not seem so painful compared to spending several thousand dollars on health insurance every year.

If You Don’t Pay the Penalties

Before you start worrying over penalties: you can’t go to jail for not paying the penalty!  The government can’t even garnish your wages.  The most the IRS can do is withhold your tax refund if you don’t pay the penalties.

Some companies, interestingly, (this pre-dates the Affordable Care Act) impose a penalty if an employee’s spouse (who doesn’t work for the same company) has coverage available from his or her own job. The company doesn’t want to be providing benefits to another company’s employee. However you make the calculation that’s best for your family, it doesn’t matter for purposes of the Affordable Care Act.