2014 and 2015 Tax Penalties For Not Having Health Insurance Under ObamaCare

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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 standard penalties for not having health insurance who do not meet the exemptions outline above:

Individuals: From 2014 (reported in 2015), individuals who did not have insurance would owe $95, or 1 percent of income, whichever is greater. In 2015 it rises to the greater of $325 or 2 percent of income. But the penalty would subsequently rise in 2016, reaching $695, or 2.5 percent of income, whichever is greater. From 2017, the minimum tax penalty 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 ($47.50).  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.

While the focus is on the $95 (single adult) penalty, the actual penalty may be much more for higher income people because the percentage component of the penalty comes into play. For example, a single person whose MAGI is $35,000 and elects not to have health insurance, may be liable for a penalty of $249 ($35,000 – $10,150 = $24,850 x 1% = $249). The maximum 2014 penalty is capped at the national average price for a bronze plan, or about $9,800.

Families: For families the 2014 health insurance non-compliance penalty is capped at $285 per family, or 1% of income, whichever is greater. In 2015 it rises to the greater of $975 or 2 percent of income. And 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 or get subsides to offset health insurance costs. People who are unemployed or cannot find a policy that costs less than 8% of their modified adjusted gross income would also be exempt from penalties under the individual mandate. 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.

Obamacare Penalties - 2014, 2015 and 2016

Obamacare Penalties – 2014, 2015 and 2016

Employers: Also from 2015 (originally 2014, but was delayed by the administration), 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.

Due to the website issues with healthcare.gov the Obama administration has announced that it will give Americans who buy health insurance through the new online marketplaces an extra six weeks – till the end of Open enrollment on March 31st, 2014, to purchase coverage before they incur the penalties discussed above. And given all the issues still plaguing the federal health care exchange website (healthcare.gov) the requirement for everyone to have health insurance under the individual mandate may be delayed even further.

In a further extension announced just before Christmas, the administration has announced Americans who had their health plans cancelled by insurance companies will be exempt (known as the “hardship exemption”) from the individual mandate and associated penalties that go into effect on January 1st. The insurance plans were cancelled because they did not meet the minimum plan requirements defined under the affordable care act and the available plans are too expensive. To claim the exemption you would have to provide proof of a canceled policy.

The administration is still working to resolve the various issues the the affordable care rollout and if there are further extensions or deferment of penalties I will post updates (you can get these by connecting via  EmailFacebookTwitter or RSS).

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{ 55 comments… read them below or add one }

gail December 23, 2013 at 11:08 am

With all the exemptions etc being allowed due to all the delays, soon everyone will be exempt from Obamacare. Which will just become another overfunded and underused government program

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Timothy December 23, 2013 at 11:33 am

The exemption is not new. Those who didn’t make enough money to afford coverage or have religious objections were already exempt from the mandate. So if you really wanted to you could avoid obamacare quite easily. That’s why I don’t get all the fuss. People need to read more about the law rather than rely on media snippets to make their decisions.

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Timothy December 23, 2013 at 11:39 am

Oh, there is a full list of the 14 exemptions available at marketplace.cms.gov. You need to look for/fill in the form called – Application for Exemption from the Shared Responsibility
Payment for Individuals who Experience Hardships – to claim the exemption. #13 is the one the latest exemption for cancelled policies. But here is a brief summary for all the exemptions currently available (you need to provide proof to claim the exemption in most cases)
1. You were homeless.
2 You were evicted in the past 6 months or were facing eviction or foreclosure
3 You received a shut-off notice from a utility
4 You recently experienced domestic violence.
5 You recently experienced the death of a close family member.
6 You experienced a fire, flood, or other natural human-caused disaster that caused substantial damage to your property.
7 You filed for bankruptcy in the last 6 months.
8 You had medical expenses you couldn’t pay in the last 24 months.
9 You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
10 You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child.
11 As a result of an eligibility appeals decision, you’re eligible either for: 1) enrollment in a qualified health plan (QHP) through the Marketplace, 2) lower costs on your monthly premiums, or 3) cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.
12 You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
13 You received a notice saying that your current health insurance plan is being cancelled, and you consider the other plans available unaffordable.
14 You experienced another hardship in obtaining health insurance.

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Jeff December 10, 2013 at 5:42 pm

This is so F’ed up if you ask me. The reason why I do not have health insurance is because I can’t afford it even through my employer. When I checked what Obamacare would cost that also did me no good. So now I am damned if I do and damned if I don’t. This A-Hole is taking away liberties and choices one at a time and re-writing the constitution slowly but surely. Health Insurance does me absolutely no good right now and even if I could afford it I doubt I would get it. My primary care physician used to charge me a $50 co-pay with my old insurance plan and now it is only $40 WITHOUT insurance. My medications are fulfilled for FREE WITHOUT INSURANCE from my local grocery store. They used to charge 20 for a refill. Tell me why the hell would I want to just give away money like that for something I currently do not need? And yes I am aware of the risk of hospital visits and what not but thats a risk and a choice that I should have the right to take and I will no longer be given this choice thanks to Obamacare.

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Hope December 11, 2013 at 5:54 pm

Jeff, I completely agree! and that’s exactly what they want. full power and no liberty and justice for all! people are scared to open there mouths about this current situation . we’re being watched and every time we speak up we are being audited! just simply submitting my email leads them access to me personally. But we need to speak up people!!! lets turn all of the tiny drops into an entire ocean! we own this country! I feel our country is turning into the Hunger games.

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Bob November 30, 2013 at 9:58 am

It’s not the government that put us here, it’s the fool people that voted all the power hungry, liberal, progressive, socialists and community organizers into office that put us here. Just listen to the media and they will tell you how good those people are….. I’m just a step away from having to go live in the forest. I can’t afford the catastrophic plan I have now. I don’t have any idea how I would pay for the exchanges plans at 4 times what I’m paying now. This was a reply to someone back in July but I thought it would be seen by more this way.

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Koa November 15, 2013 at 12:16 pm

One word for this mess.. ” IMPEACHMENT”

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Don Jones November 11, 2013 at 3:52 am

I am an American and I resemble that remark.

Got a piece of land to grow my own. So, whoever you are, come on by for a (slightly chewed upon) chicken leg.

I will leave a tendon or two for you.

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Bc November 7, 2013 at 4:37 am

Let’s be real…. The American people are not going to conform to this B.S. People will stop reporting to the IRS. I have not heard a single good thing about this law. Has anyone???… Some people will be better off living in poverty or on welfare for the rest of their lives. Milk the the system.. Submit and conform. People are going to literally die because of Obama’s radical “Bright Idea”. What are the consequences for not paying the penalties? Jail time? Obama’s a joke and so are his long term pipe dreams. This country is going to be economically crippled, and He’s doing a great job of ruining our country and it’s ideals…. He has been a great illusionist from the start and there are many suckers to be had. This is just the beginning to the end of our freedom… Be prepared, for the worst is yet to come of this…

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Donald Johnson November 1, 2013 at 5:09 am

Well, it would be nice that voting solves our problems. But, when I think about it, the vote is ALWAYS a vote between a stinker and waste-pile. Think about Obama versus Romney. WOW. Neither touched a single issue that matters. It turns out that Mr Slick, Obama (I voted for the guy, shame on me) was worse than anyone from Chicago warned me about (one of my pals said, “Look out, Chicago Politics are something America is not ready for!!!!).

The big fib here is that we were told, over and over, that we could keep our plans. I was dumped by letter from Anthem Blue cross…..the new plan is WAY more expensive, my deductible increased, and the bene’s added, such as Maternity care, are ADDED as a cost to my group. The old plan was based upon the group to which I belong: early retired and Broke. Well, not broke, but afraid of that notion.

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Don Harris October 31, 2013 at 1:37 pm

Hey folks, start the fight for our country and ideals now. VOTE for your rights, throw out those not fighting for our rights. Like Senator Cornyn of Texas, he didn’t stand with Senator Cruz to fight for us and was ready to capitulate. His political ad on radio makes me sick. He is out as far as This Mex is concerned. VOTE in those who will not apologize, socialize, mandate or dictate. I could go on with my disillusioned outlook on our government, but our only weapon is the vote. No one in this administration is or will be held accountable for abuse or lack of dedication to their duties. Only those invited to the Whitehouse for a beer. Ladies, beware the rock star’s and those ladies who will not be held accountable wanting or posturing for the presidents seat. Pick your candidate, hopefully one for God and our Nation as the founding fathers designed it.

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Jimmy October 24, 2013 at 7:39 am

law allows for a “short coverage gaps” of up to three months before the fines take effect

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John December 16, 2013 at 3:20 pm

Looks like the “gap” you refer to is defined as, only if you “are between jobs and without insurance for up to three months.”

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Troy Aikman October 19, 2013 at 7:42 pm

The poor people making more than $200,000 a year better look out! Did anyone read the whole page before commenting that the penalty is unfair? There was a recent study that indicated people who make $180,000 or more a year have ‘more than enough money’ to cover their costs.

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js_biggs October 4, 2013 at 8:41 pm

I love the fact that Americans are going to have to starve to pay for Obamacare. They deserve it.

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skamman October 2, 2013 at 4:59 pm

No ones talking about big companies cutting hours to avoid paying healthcare for their employees. Like in restaurants, i.e. darden who plan to cut employee hours below 30 a week. Now you have all these people looking for other jobs to combat the loss of money. So when you go to get extra employment there is about a hundred people in front of you with applications for the same position. This in turn will make unemployment go up, poverty go up, and crime rise to an astronomical high. Welcome to the new America. Hope you didn’t vote against people having guns, you’ll need to protect urself against all the home invasions, and store robberies that are going to take place just to afford going to the doctors. Shoot there might even be take overs at the doctors offices just to get a check up….lol. Doctors being held hostage at gun point to check your ears and throat.

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Charles August 23, 2013 at 12:26 pm

Some employers/insurance companies have creatively bypassed Obamacare laws by ‘repackaging’ their coverage into a different name. I’m retired from a major American corporation (but too young for Medicare), and carry employer-paid health insurance with one of the largest insurers. I have been advised by both the federal & state insurance regulatory agencies that my retiree’s insurance is exempt from all Obamacare laws. While I can live with that (it’s an excellent policy), my concern is that if it’s not regulated under Obamacare, then will it be considered ‘approved’ coverage when it comes time to report coverage to the IRS?
I’ve worked hard all my life (usually holding more than one job at a time), and have donated countless of hours to my community and church… I never would have thought that losing what I’ve worked for, ending up in a home, and then being denied health care via Obamacare rules (so I can die and not be a financial burden to the government) could become a reality.
Welcome to the New America.

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Tina August 3, 2013 at 11:22 am

It’s the government that put us into this situation. They allow poisons into our environment such as processed foods, deadly chemicals, contaminated drinking water, etc. – poisons that they know very well will incapacitate and/or kill people. And don’t tell me that it’s my responsibility if I get sick under those circumstances. They purposely make our citizens ill, half the time as experiments, and then allow greedy selfish corporations to give people poisonous, expensive “medications” which they then become unable to function or live without. And then they actually expect that the sick must somehow break their backs to afford it- like getting blood from stones. Hospitals and doctors overcharge ridiculously and the fact is we’re now being forced to pay them, instead of them being forced to lower their rates, and push healthier lifestyles and holistic healing instead of being drug dealers. I’m sorry to say that our government is either a joke or a horrible monster. They see citizens as expendable slaves with no value besides populating the workforce to generate money. They take hundreds of dollars out of my and everybody else’s paychecks every month and then totally waste what they don’t line their own pockets with. People make politics seem so complicated, and that’s exactly what the government wants- to keep confusion in the mix in order to cover up their horrible truth.

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Andy (Author) July 16, 2013 at 10:38 am

Note: Household income under Obamacare is different to your adjusted gross income (AGI) or modified adjusted gross income (MAGI). Household income includes the modified adjusted gross income of your tax filing dependents (children, spouse) as well.

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Susa July 4, 2013 at 5:14 am

Well, let’s see just how Obamacare has effected monthly premiums….at my daughters office premiums per employee went from $545 per employee to $905 per month. And that is just this years rate increase. No change in plan. If anyone thinks that all of these “not cost” services are not costing us anything, they are as delusional as the idiots that passed it. Someone has to pay, and do you really think that businesses are willing or even able to absorb these increases? NO! And just wait until the insurance mandate goes into effect and the employees of a small business (under 50 employees) have to either purchase their own insurance or pay the penalty of as much as $2065 for a family. They are now hurting the same people they supposedly are wanting to help.

Are these employees going to magically find that extra money in their paycheck? They might if Obama has his way, he wants minimum wage to go up. For every dollar paid out in increased wages doesn’t just cost the employer a dollar, it cost about $1.17 (an estimate depending on your state). Let’s break it down. The employer has to pay the employer portion of social security, insurance premiums based on total wages, and yes taxes based on employee wages (in our case occupational and business taxes). All of this has to be passed on to who? You got it, to the people that just got the raise, but now they actually have to cover the wage increase and the additional cost as well by paying more for goods and services. So what on the surface looks like an increase actually decreases their spending power by about .17 for every extra dollar earned. Sometimes I wonder, have these brilliant people in Washington ever put a pencil to paper to see their effects on the economy. I don’t think so.

People, dig deep, look into what these elected officials are doing. You don’t have to take my word for it, just talk to any small business owner. They will tell you what all of this will cost and who is going to pay for it.

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Dave October 8, 2013 at 4:54 pm

When the minimum wage has doubled, everyone else’s wage will have to go up as well. When that happens services and products will also go up and Obama can justify the devaluation of the dollar. I haven’t been able to see it any other way.

Add the damaging expense of AHA to that (I’m sure that will go up, as well) and you have a catastrophe. Of course, our ability to borrow more money will not be there, so we wind up where POTUS wanted us at the start – as the poorest country on the face of the Earth.

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John October 17, 2013 at 7:22 pm

They have done the calculations. You are just realizing what they already have known.

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Najah February 20, 2013 at 2:44 pm

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!!!

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aclnal February 13, 2013 at 7:17 pm

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.

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Michelle January 15, 2013 at 9:03 pm

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.

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Jessica June 17, 2013 at 1:39 am

The illegals are what keeps this country running. Learn ur facts first hunny. And ur grandparents who aren’t alive to see this, too bad I wish they could. A black president and kids of every race able to get the medicare they need. I would love to shove that in front of ther republican stuck up racist faces.

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Skeeter July 4, 2013 at 9:46 am

@Jessica, How and where did you ever see the word racist in Michelle’s comment? She did not imply racism toward our president nor towards any political party. We are all sick and tired of the freeloaders in this country!! Jessica…YOU must be an illegal, a welfare bum or just a flat out racist!!!!!!!!! Do you realize how stupid your comment sounds? Please think about what you are about to say and you won’t seem so uneducated. But then again, you are what is wrong with this country and I did not expect anything different from someone like you. And yes, my parents and grandparents worked hard to get everything and expected no hand outs from anyone, especially the government. If they couldn’t afford it, they didn’t get it, including health care. I did not have health care growing up because we didn’t go to the emergency with earaches, scraped knees, etc. But maybe your parents and grandparents weren’t like mine. Maybe you are just another “product” of your upbringing…welfare handed down generation after generation…LAZY BUMS!! Now does that make me a racist? Wait before you answer, I know what your answer is…it is always the same answer. Everyone is a racist who says anything about our president right? WRONG AGAIN. What label would you put on someone who has said anything about past presidents…NONE of them were black? Really? Stupid Idiot, get a job and stop mooching off of the hard working Americans who actually care about our country and the destructive path it is headed.

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Brendie September 5, 2013 at 1:05 pm

@ Skeeter – I so agree with you on this one. I am so tired of hearing the racist card being used. Now-A-Days the descrimination is against those individuals that are “white”. I was a single mom going to college with three kids and working FT with a 3.9 GPA and could not qualify for a scholarship because I only qualified for ones where an individual had to be “black” to qualify. I have student loans out the wazoo because I went after my AS, BA and MA degrees. Yes people I worked FT while going to school FT while being a single mom with 3 kids. Been with the same company for 15 years now… I believe that those individuals that are “living off the system” need to do community service in order to qualify for benefits. They also need to prove that they are looking for work. I remember barely being able to buy food for my kids because I supposedely made too much at $12.86 per hour to qualify for food stamps. Going to the grocery store was so depressing because I had mac and cheese and hotdogs in my cart while those individuals that were checking out in front of me with food stamps were chowing down on steaks and potatoes and pork chops, decked out with a ton of gold around their neck….going out to their “pimping” vehicles….GO FIGURE!!!!! I agree with Michelle and she was not discriminatory against a certain race just on the WELFARE BUMS of society that cant keep their legs crossed and make tons of babies that they cannot afford just to continue to live off the system…I believe those individuals that voted for a President, just because of the color of his skin, are the ones that are truly racist. I know I voted for the best person to handle the situation that we “as a country” are in. Geesh I dont see Clinton Care or Bush Care out there. And to tell those individuals that make over $200,000 (I believe) that they have to pay health care taxes for those individuals that are “low income” is also rediculous. If they are making that kinda money then they worked for it and are probably educated. Lets focus instead on educating people so that they do not sound as rediculous as Jessica sounded.

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Brendie September 5, 2013 at 1:13 pm

Oh and FYI – I make $50,000 a year and my husband makes over $50,000 a year and he has medical thru the VA and thru work and I have medical for me and my kids thru work.

Cynthia October 27, 2013 at 1:01 am

Jessica, “hunny”, I don’t know what country you are in, but in this country, illegals are taking jobs AWAY from Americans, they are NOT what is keeping the country running. They are a drain on state’s economies, just look at California and Arizona. And you are saying that just Obama’s black half is president and his white half isn’t? (He was raised by his white mother and white grandmother you know…) Do you know for sure, 100%, that no other president on our history didn’t have any negro blood in them??? Or native American blood in them?? YOU’RE the racist! Get real sweetheart. What are you…like 12?

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Mad March 31, 2014 at 9:47 pm

Jessica
You are prejudice and ignorant. I wish my dad was alive to tell you how messed up your thinking is.
Unfortunately I am left to live your take over of this once great country. Go back to your country and take with you the diseases that we eradicated here in the 50s and 60s. You are not entitled to the advances that my families blood paid for.
And don’t give me the BS ta we took this country from the Indians and Mexicans. The Mexicans took their land from the Indians too. It is the way of the world as it always has been. If hadn’t , the TJ border (arm pit) would just be further north. STICK IT !!!!!

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Donna January 10, 2013 at 5:30 pm

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.

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Patty B December 28, 2012 at 2:49 pm

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!

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D. Sanders December 28, 2012 at 4:34 pm

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.

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booley bob November 13, 2012 at 4:12 pm

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.

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Andy (Author) November 13, 2012 at 9:32 pm

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.

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G.Woolhouse November 16, 2012 at 10:42 am

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.

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D. Sanders September 15, 2012 at 6:20 pm

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.

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Andy (Author) November 13, 2012 at 9:29 pm

Yep prevention and knowledge are sometime just as important.

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Kathy July 8, 2012 at 2:55 pm

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”.

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Nic July 17, 2012 at 5:02 pm

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.

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Dave July 5, 2012 at 11:39 am

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

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Terry July 2, 2012 at 2:37 pm

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?

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andys2i July 4, 2012 at 11:30 am

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.

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Darwin June 29, 2012 at 10:13 pm

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.

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andys2i July 4, 2012 at 11:30 am

Thanks Darwin. Some great information here. I will add it to the article.

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jen October 17, 2013 at 11:08 pm

Do you think that once the IRS sees that people have figured out that paying the penalty is actually cheaper than the insurance that they will increase the penalties??

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Tony June 29, 2012 at 11:50 am

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.

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Gail June 29, 2012 at 9:44 am

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.

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Mark June 29, 2012 at 9:42 am

Obamacare was bad law yesterday. It’s bad law today. Nuff Said

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Darius June 29, 2012 at 3:17 pm

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.

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Griffin June 29, 2012 at 3:18 pm

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?

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Julann July 12, 2012 at 6:20 pm

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.

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Jeff July 1, 2012 at 1:51 pm

It’s your personal opinion only. It certainly isn’t “enough” for anyone.

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Joey Novak July 2, 2012 at 3:31 am

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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