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Obamacare uninsured avoid penalty

By Jay MacDonald · Bankrate.com
Tuesday, August 12, 2014
Posted: 6 am ET

© Chris Bradshaw/Shutterstock.comA new government report predicts that nearly 90 percent of the expected 30 million Americans without health insurance in 2016 won't face a tax penalty under Obamacare, because they'll likely qualify for at least one exemption under the Affordable Care Act.

According to new findings by the nonpartisan Congressional Budget Office and the Joint Committee on Taxation, just 4 million uninsured adults will be subject to the tax penalty in 2016, down from the 6 million projected in a September 2012 forecast. As a result, the CBO now expects Obamacare tax penalty collections of $4 billion in 2016, down from the previous estimate of $7 billion.

Penalty was meant as sign-up incentive

Under Obamacare, the penalty for tax year 2014 is $95 or 1 percent of an individual’s taxable income, whichever is higher. It increases to $325 or 2 percent of income in 2015, and $695 or 2.5 percent of income in 2016.

While the architects of the Affordable Care Act sought to use the tax penalty as an incentive to encourage most Americans to purchase health insurance, federal health officials have since expanded the ways in which consumers might avoid the penalty by filing for an exemption.

The law's original exemptions were pretty clear. You'd get a pass if:

  • Your income is so low you're not required to file an income tax return.
  • Health insurance would cost more than 8 percent of your income.
  • You belong to certain federally recognized tribes or religious sects.
  • You're incarcerated.
  • You're in the country illegally.
  • You're uninsured for fewer than three months of the year.

Expanding exemptions

But in December 2013, the Obama administration issued a list of 14 additional exemptions that state insurance exchanges can offer in certain situations, including but not limited to:

  • You recently experienced domestic violence.
  • A close family member recently died.
  • You recently sustained fire, flood or other substantial property damage.
  • You're facing eviction or foreclosure.
  • You're caring for an ill, disabled or aging family member.

While those exempt from the health care requirement may breathe a sigh of relief, health insurers aren't happy with the way this has rolled out. That's because they based the premium rates they're charging on the exchanges, in part, on expected revenue from customers who'd sign up for plans so as not to trigger the penalty. They're also concerned that the exemptions may be keeping young, healthier Americans out of the insurance pool, thereby putting pressure on the rates for the rest of the population.

Here's a look back at 10 critical Obamacare rules.

Follow me on Twitter: @omnisaurus

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Veteran contributing editor Jay MacDonald is co-author of "Future Millionaires' Guidebook."

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1 Comment
cindilouhoo
August 12, 2014 at 10:30 pm

I am eligible for medicare, but I can't afford it......so no insurance company will insure me....................NICE!!!!!!!!!!!

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