Now that the Supreme court has upheld key provisions of President Obama’s health care reform plan, also known as ObamaCare or the Affordable Care Act, all Americans with an income above a certain threshold will have to purchase health insurance. The provision referred to as the individual mandate is what will legally require most US citizens and legal residents to obtain private, employer sponsored or public health insurance (through state run exchanges) starting in 2014. Based on the most recent data available it is estimated that more than half of the US population gets health insurance directly through their employers, while 50 million people are uninsured. The remaining consumers either buy their own private insurance or are covered by federal/state government programs, such as Medicaid and Medicare.
Here is a brief summary of the penalties for not having health insurance:
Individuals: From 2014 (reported in 2015), individuals who did not have insurance would owe $95, or 1 percent of income, whichever is greater. But the penalty would subsequently rise in 2016, reaching $695, or 2 percent of income, whichever is greater. From 2017, the minimum tax per person will rise each year with inflation. And for children 18 and under, the minimum per-person tax is half of that for adults. The tax penalty is pro-rated, so that a person who is not covered for only a single month would pay 1/12th of the tax that would be due for the full year.
Families: For families the health insurance non-compliance penalty is capped at $285 per family, or 1% of income, whichever is greater. By 2016, it will jump sharply to $2,085 per family, or 2.5% of income, whichever is greater. From 2017, the penalty/tax will rise in line with inflation. The minimum amount per family is capped at triple the per-person tax, no matter how many individuals are in the taxpayer’s household. So, for example, a couple with one child over 18 (or two children age 18 or under), and no coverage, would pay a minimum of $285 in 2014, $975 in 2015 and $2,085 in 2016. And that would be the minimum no matter how many uninsured dependents a taxpayer has.
Individuals or families who fall below income-tax filing thresholds would not owe anything. Nor would people who are unemployed or cannot find a policy that costs less than 8% of their modified adjusted gross income. On the other hand, to offset the cost of providing insurance to low income households, individuals making more than $200,000 a year and couples earning above $250,000 will get additional health care taxes deducted as payroll taxes. These people are also hit with a 3.8 percent tax on investment income.
Employers: Also from 2014, employers with 50 or more workers could face federal fines for not providing insurance coverage. Several of the other changes would take effect much sooner. For the current and future impacts of health insurance on employers see this article.
How Individual Health Care Coverage Will be Monitored
Since 2011, employers have had to state the value of the health care benefits provided to each employee on their W-2 at the end of each year. Insurers (including employers who self-insure) that provide minimum essential coverage to any individual during a calendar year will also have to report certain health insurance coverage information to both the covered individual and the IRS. Thus, the IRS will ultimately be responsible for reporting an individuals and business’ non-compliance with purchasing health insurance.
I will continue to post more information on other aspects of President Obama’s health care plan and encourage you to subscribe (free) via Email or RSS to get the latest updates
{ 26 comments… read them below or add one }
I am still not clear. I cannot afford my companies insurance, so I pay privately out of my own pocket. I make less than $37,000 a year and pay for all my own meds, etc. This last year I figured that I pay over 7.5% of my income towards my healthcare needs. Luckily, my son, who I adopted, has Medicaid until he is 18, or 21 if he is college. So what does this mean for me??? Will I still have a penalty for this?? A friend of my said a tax guy told her that if you don’t carry “major medical” you could be penalized up to $2,900 or more!!! Is this the truth?!?!? I am so confused. I am also worried because it’s bad enough my income tax returns are rapidly going down hill and I REALLY can’t afford to lose anymore money. I don’t know why they call this “affordable healthcare” because I am not seeing any of it!!!
Does anyone know what the penalty would be if I don’t add my husband (homemaker/ not employed) to my employer sponsored insurance plan? I have our children covered but to add him to the policy would cost an estimated $220.00/mo. He is very healthy and we are willing to pay medical bills if something drastic happens but the added expense to add him is more than our budget can allow. He is a SAH dad with no unemployment benefits.
Would it be worth looking into an exchange in the fall with a high ded and high coins plan or would they require him to be signed up under my private insurance.
This all is very confusing and irritating that our liberties are being slowly drained away. I have tried to research as much as I can online for the exchange program but there is very little info until fall.
Why not make the illegals and the welfare bums of this country pay for the Obamacare ? They are the only ones with money in this country since they are the ones that put us in the mess. God, I am glad my parents and grandparents aren’t alive to see this screwed us mess we are in.
I draw disability and do not get Medicare for 24 months nor do I qualify Medicaid . Nor can I afford regular insurance because my check is so small. I can NOT believe that the government is forcing us to buy something we can’t afford and at the same penalize us by not allowing us to get medicare. So at this point due I buy insurance and not pay for meds and rent or what……..THIS IS SO UNFAIR to the American people. Let the senators, congress, etc suffer the indignities that are imposing.
In all my years, 56 to be exact, I have never seen such a scam pulled by the Government as this new tax being shoved down our throats. This is called “healthcare???” Where is the care here? Just watch what happens. All the government is trying to do is create more welfare states. Nobody can afford these ridiculous, over-inflated hospital and medical fees. The only ones who will profit are the hospitals and pill-pushing, pharmaceutical companies. It’s just business as usual and the bottom line is…money. It will all eventually implode. Wake up people!
Your best solution is to NOT buy insurance and pay the penalty tax, which is more reasonable than you think. Next, practice disease prevention, which is easier than you think. Immediately cut out sugar and simple carbohydrate foods that convert to sugar in your body. What few people realize is that sugar is the main culprit in arthritis, diabetes, heart disease, and cancer. Also, look up which foods are acidic and which ones are alkaline — make sure you eat small amounts of acidic foods and larger amounts of alkaline foods. That’s because disease, and especially cancer, loves an acidic body pH. Next, avoid packaged foods and eat like a cave man — meats, fish, nuts, and fresh fruits and vegetables, preferably organic. Next, never eat anything that has partially hydrogenated oil in it. Avoid all vegetable oils except Cocunut and Olive Oil. Finally, take Lugol’s 2% iodine drops daily, which will prevent cancer and thyroid disorders. Few Americans understand that the American food industry is creating a steady stream of sick people for the medical industry to treat. America is the sickest civilized nation on earth. And then, once you go to the doctor — unless you’re seeing a holistic doctor, or at least one practicing integrative medicine (the best of holistic and conventional) — you will be prescribed drugs for your ailment and there will be no attempt to address the underlying cause of your disease. Doctors in medical school learn only how to diagnose diaseases and then prescribe drugs to treat those diseases; they learn nothing about good nutrition and disease prevention. And the drugs often make things worse. Wake up, people!!! The AMA can’t solve your problems, and neither can the U.S. government.
I’ve read these comments and I agree that Obamacare will collapse for the reasons stated, its cheaper to pay the tax than buy insurance. For example, if you have someone who doesn’t access health care much, they would be better off to pay the tax and pocket the savings for the few times they do need healthcare. Basic care should be the responsibility of everyone to pay without insurance. People could then purchase catastrophic insurance for those very serious illnesses that don’t affect most of us. Thats what we should be focusing on and paying insurance for. This would, then, be similar to medicare. You pay into it over a lifetime but don’t collect anything until you reach a trigger point (age). Under catastrophic care, you pay into it over a lifetime but don’t collect until you reach a trigger point (serious sustained illness). Its too costly to do it any other way.
I personally don’t think Obamacare will collapse anytime soon, particularly after his re-election and focus on the fiscal cliff over the the next 6 months. I also think it is a step in the right direction towards realistic and sustainable health care reform. The problem with insurance is that no one is going to sell it to you after you discover the serious illness, and most people are going to think “I will never get cancer, say” and once they do it will be too late to get insurance. So forcing or compelling people to buy it is probably the only way to get universal basic coverage.
But Andy – Doesn’t Obamacare also prevent insurers from denying coverage because of pre-existing conditions? Doesn’t that mean I could theoretically sign up for insurance in the ambulance on the way to the hospital, and they’d have to take me? And doesn’t that just about guarantee the collapse booley bob mentioned? I mean, even at the max, the penalty is still less than half of purchasing insurance.
Interesting to read the original analysis and all the comments. But here’s what few seem to understand: Our existing sysem before the reform was seriously flawed. We spent more on healthcare and got worse results than any other civilized nation in the world, in spite of the propaganda that we have the best system in the world. Now, is ObamaCare a good solution? No, it is not. It’s impossible to overhaul 17% of the economy and not have it be a mess with unintended consequences. And certainly, many people will choose to pay the penalty rather than buy insurance. If that leads to the collapse of the system so that a single payer system must be adopted, then maybe that is the best result. Certainly our old system was unsustainable, making insurance unaffordable for everyone but the upper middle class and rich. The real solution is for people to take responsibility for the health and not not smoke and eat bad foods that lead to arthritis, diabetes, cancer, and heart disease. It would also help to get diabetes, heart-disease and cancer causing ingredients out of food, as well as toxins in the air, water, and consumer products. But these things will never happen. So, having the system collapse and going to single payer just might be the best result, with one exception: the single payer system would provide just the basics, and then the upper middle class and rich would buy Cadillac supplement plans. Gotta have something for the rich beside Tiffany’s. But, as you can see by my comments, there is no such thing as a perfect system, just as there is no perfect world. But consider that Chief Justice Roberts made the individual mandate a tax, which means ObamaCare can be repealed with 51 votes in the Senate via “budget reconciliation.” So, it’s quite likely that Obamacare will be swept away in January of 2013. Then, we’ll go back to a system that is guaranteed to be unsustainable. And if ObamaCare survives, then we will have to improve it, or go to single payer. Whatever happens your best choice is to learn what causes disease and avoid it. And also learn that American food manufacturers, industrial polluters, AMA doctors, and insurance companies do not have your best health interests in mind.
Yep prevention and knowledge are sometime just as important.
In plain english, the individual mandate requires every living American to purchase health insurance for themselves, and any dependants. (Excluding illegal aliens, indian tribes, people in prison and special people given exemptions).
In order to enforce this mandate, the law calls for penalties to be assessed under the context of your income tax filings if you do not have coverage for more than 4 consecutive months.
How the fine amount is calculated is slightly harder to explain than quantum string theory, and will likely require that you hire someone to figure it out for you. I can say, however, that the fines are almost certainly going to be miniscule in comparison to the cost of an insurance plan.
And that, ladies and gentleman, is the dirty secret of Obamacare. The individual mandate is not designed to make people responsible and buy insurance. It is designed to destroy the private insurance industry almost totally and in the space of just a few years.
Senator Ron Johnson has been accurately describing the expected outcomes of Obamacare where employer funded coverage is concerned. Long story short, it will soon cease to exist because employers will soon discover it is a lot cheaper to pay the fine for not offering coverage to employees than it is to pay their share of the premiums. More than $12,000 cheaper on average, assuming premiums do not continue to go up.
What Sen. Johnson has not yet explored is what will happen when individuals face the same decision employers do. Specifically, what will people do when they figure out that they can pay a minimal fine and avoid paying a huge premium for insurance.
“Wait!”, you say, ”People will not do that because they will be afraid they will get sick and not have insurance! They will HAVE to buy it!”
Ummm….wrong. Well, eventually anyway. See, Obamacare requires that anyone requesting insurance coverage be allowed to buy it, with all pre-existing conditions covered fully, at no increased premium costs. In fact, denial of coverage is all but impossible.
So pretty soon people will figure out how to game this system.
Lets say you are a family of 4 and make the median income of about $50,000 per year. Your employer just dropped coverage and now you are under the individual mandate. A family plan will cost about $20,000 per year (at the current rate of premium increases), and you are told you ar eligible for subsidies from the taxpayers to cover some of that cost.
That subsidy works out to probably about $10,000. This means you will still need to pay $10,000 for insurance, or $833 per month.
Read that again. You make $50,000 and will have to pay $833 per month for insurance. That family probably pays less than that for housing. That is a HUGE amount. (20% of their gross)
It gets worse. That $833 per month comes out of AFTER TAX income. When you have an employer sponsored plan like most do now, your contribution to premiums comes out of pre tax income and reduces your tax liability.
Not under this policy, though. That $833 comes out of the net. After Social Security, Medicare and Income Taxes are taken out. It comes out of take home pay.
For our example family, that $833 per month comes out of their take home pay of roughly $40,000. That works out to be about 25% of their take home pay every month for insurance.
Wow.
So what is a reasonable person going to conclude:
1) Insurance costs $833 per month, and the fine is a one time charge of about $400. – The fine is a lot less expensive than insurance.
2) I can pay for most of my families “regular” medical care (prescriptions, office visits, etc.) for less than the $10,000 insurance costs. – Buying insurance doesn’t make financial sense.
3) If someone in our family gets sick or has an accident, I can call the insurance company on the way to the hospital and get insurance, and they can’t make me pay more for it or say no to any care after I sign up. – There is almost no risk from not having insurance.
4) I can drop insurance as soon as the big bills are paid, and do #3 as many times as I need to, and they can’t stop me from getting covered. – There is actually NO risk for not having insurance.
So people will quickly learn how to scam the system, pay a little fine, and only get insurance when they have big bills to pay.
In the insurance industry this is called “adverse selection”, which means that only people using a lot of insurance buy insurance, meaning there is never enough premium money to cover the claims costs.
Insurance, as it exists today, relies on many people paying premium and a relative few using it at any one time, making it possible to pay the claims and not go broke in the process. (Sound a lot like socialism to you? Yeah, me too.)
Obamacare destroys this model and results in only people using insurance paying premiums, and then not paying enough to cover their own claims, much less help pay for anyone else’s.
When this happens, there can only be one outcome. Insurance companies will either go bankrupt and cease to exist, or require massive bailouts from the government to remain in business.
Bailouts are never going to happen. It would be way too expensive, and the US is already too far in debt to be able to do it anyway.
That means insurance companies go broke, and “insurance” becomes harder and hard to buy for those that want to.
Who do you think will ride to the rescue when this happens? Well, your knight in shining armor of course.
The Federal government will arrive to “save the day” with a single payer, government run, Canada style system. They will tell the public “Private insurance has failed the people of America, and proven it cannot work. Only a government run system can provide the care the American people need.”
All of this is by design of course. You have to believe that Democrats and Obama are supremely stupid to think they didn’t know this was a plan designed to fail. They WANT it to fail. They NEED it to fail.
Failure finally makes a single payer government run system popular and lets them finally take control over the people they way they want to. Control “health care” and you have control of almost every aspect of people’s lives. This is what they want. Power and control by the “intelligent elite” over the “unwashed masses”.
Perfectly said and very accurate from what my accountant tells me. if someone can’t see the importance of getting out on the streets for this election and exposing all of this, they deserve to be consumed by the socialist party that is behind this, i.e. the progressive movement.
The tragedy for our country is that most people who are all for Obama could not tell you the difference between a free enterprise system or a marxist state, and certainly not socialism and capitalism. They rant because a hand full of people raked in a bunch of money illegally and got away with it, without fully understanding what the cause for this was.
They have decided (because someone else got them mad enough to do it) to throw the baby out with the dirty bathwater, i.e. toss out free enterprise and capitalism for something that – in their mind – seems right to them, i.e. government growing big enough to ‘protect them’ from the money mongers they have been told are controlling their future and the cause for the present problems.
They are clueless where the problem even stems from, clueless about the world bank’s involvement, the manipulation of currencies by the world bank, and the mandates on the US to bail out every failed socialist country or third world country that mismanages their finances and leaves their people starving. They seem only to be concerned with seeing that someone gives them something for nothing, and hold out that the government will keep them all safe and cozy and happy even if they don’t work.
I digress.
This is a battle of ideologies and nothing more. A pre-war skirmish for a totalitarian rule devoid of a government that is operated under Constitutional law and a Bill of Rights that protect the rights of its citizens.
Can someone, anyone, point me to a table that will show what this will cost us? My wife and I are retired, 59 and 58 years old, and are not sure what our income will be in the coming years. I have p0ked around the internet for over a year and STILL I cannot find the costs to childless couples over 55 years old. This would be a great favor to me.
Thanks,
DJ
But what if I live overseas (stil an American citizen) and don’t use American health insurance? Am I liable to pay for health care?
If you meet the criteria to file a US tax return, you will have to show proof of health insurance from overseas. Note however that the IRS is still working through the regulations of this provision and will issue more guidance. I imagine for foreign residents there will be additional exceptions. I will update this article when I get more information on this. Great question.
Andy – Just wanted to add some more points to your article from Factcheck.org
- From 2017, the minimum tax per person will rise each year with inflation. And for children 18 and under, the minimum per-person tax is half of that for adults.
The minimum amount per family is capped at triple the per-person tax, no matter how many individuals are in the taxpayer’s household. So, for example, a couple with one child over 18 (or two children age 18 or under), and no coverage, would pay a minimum of $285 in 2014, $975 in 2015 and $2,085 in 2016. And that would be the minimum no matter how many uninsured dependents a taxpayer has.
The tax would be more for persons with higher taxable incomes. When phased in, it will be 2.5 percent of household income that exceeds the income threshold for filing a tax return. For 2011, those thresholds were $9,500 for a single person under age 65, and $19,000 for a married person filing jointly with a spouse. So, to give a rough calculation, a couple with $100,000 of income might pay a tax of $2,025 if they choose to go without coverage.
A tax is assessed for each month that a person is not covered. It is pro-rated, so that a person who is not covered for only a single month would pay 1/12th of the tax that would be due for the full year. So, for example, the minimum tax per person for failing to get coverage would be $7.92 for each month of 2014, $28.75 for each month of 2015, and $57.92 for each month of 2016, when fully phased in.
Thanks Darwin. Some great information here. I will add it to the article.
Yes, Mark would rather we penalize people who pay for health insurance by forcing them to take the brunt of the cost involved in taking care of those people without insurance. Funny conservative paradox… only it was NOT a paradox for Romney when he had a similar plan when he was state governor. Perfect example of a party following a marketing strategy instead of their true ideals.
Why are people complaining so much. Its about time we started the ball rolling on health care reform. The law may not be prefect, but it is a start towards controlling the spiralling costs of health care in this country.
Obamacare was bad law yesterday. It’s bad law today. Nuff Said
Choose not to have health insurance and your are penalized. If you don’t want to be penalized, purchase health insurance. It’s still a choice.
Obamacare is not a tax or a penalty for those that don’t have health insurance–it will in fact save people money on healthcare! It will lead to reduced premiums for all people and better health care for all people. The right wingers, and their propaganda source Fox News, are maligning Obamacare through a series of duplicitous comments because they want the current 100% increase in healthcare every 10 years to continue ad infintum with no respite for the American People. Obamacare will stop the uninsured from taking advantage of ER’s and passing the cost along to the insured in the form of higher premiums or higher taxes. It will free up doctors’ time in the ER. It will cover tens of millions more people. It will increase focus on HOW TO STAY WELL instead of after the fact treatments, which cost huge sums of money so that over time heath care costs for the total population will be lowered substantially. It will eliminate pre-condition clauses, limits on coverage and it will reduce drug prices for the American People. The right wing GOP has NO solution for anything, let alone health care—they are content with 100% increases in costs every ten years. As everyone knows, as a result of these unsustainable cost increases, business has had to saddle their employees with more and more of these increased costs. It’s over the top now, but the GOP doesn’t care. Obama is taking a sensible approach which will reduce healthcare cost over time, cover millions more people, and result in a healthier population. What can’t the right wingers understand about this?
Griffin: your arguments do not make any sense. The reason that insurance costs what it does is simple statistics and algorithims. They assess the risk of insuring you and when the cost is too high, they drop you. How can insurance costs go down when they will now be required to keep their “million dollar” patients? This is a push to disolve the private insurance business and go to universal care. People know how to stay well, people know when they are over weight, people know they should not smoke, etc. but we still have free will and people will continue to do these things. What’s next? If your BMI is over 30 we add a thousand dollars per point until you get it down to where the government wants it? The arguments over Obama Care are not left or right, they are about keeping the government out of our lives.
It’s your personal opinion only. It certainly isn’t “enough” for anyone.
Right on Mark. The real cause of rising health care costs are litigious lawyers, and insurance companies who flex their muscles and force doctors to raise their prices to get a decent payment from them. Obama-care does nothing to address these problems.
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