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Should you pay for health insurance or pay the penalty?

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@patriciaborns  It's called the Individual Shared Responsibility Payment: an option under the Affordable Care Act for individuals to pay a fee into the system rather than buy a healthcare plan. Called "the penalty," for short, it was a salve for those who objected to the requirement for individuals to have health insurance; a requirement that's important in order for the ACA to work.

Now, as Healthcare.gov becomes faster and easier for more people to use, the price of health insurance -- which has never been cheap -- is becoming more visible to consumers who in many cases have never had it before.

In 2014, the penalty for not having health insurance is one percent of your annual household income, or $95 per person and $47.50 per child under 18 -- whichever is higher. If you make $62,000 a year and have one child, you would pay $620 to opt out of coverage. That's a lot when you consider it's money you spend to get nothing in return. The penalty will increase in 2015 and 2016, although it is capped not to exceed the average national annual cost of a Bronze plan.

Still, even a subsidized health plan, which assures that you will never pay more than a set percentage of your income for health insurance, can be perceived as too costly by people who have never budgeted for that expense.

In October, at a Homestead nursery,uninsured workers earning about $21,000/year told HearaldHealth reporter Dan Chang and me that their small salaries are already stretched to meet everyday expenses for their families. Rosa Corea and her husband keep their children covered under Medicaid but do without themselves, except for an occasional visit to a sliding scale clinic. While she would like to be able to see a doctor and have hospital coverage, “Without insurance, we could keep doing what we do now. You always look for the most economical thing to do," Corea said.

A subsidized health plan for Corea and her husband would run about $55 a month, or $660 a year; the penalty: $210. That's a big difference, and a hard decision for a low-wage worker to make.

The New York TImes gives another example of a family of four making $59,000 a year. While an average Silver health plan including a subsidy would cover them for $4,800 a year, their penalty for opting out would be $387. But that would leave the children uncovered, while the health plan would insure the whole family for about $99 per person a month, In this case, opting in might be worth the financial stretch.  

Some people will be able to file for exceptions to the individual mandate, as explained on the IRS website.

And as NYT points out, "the federal government cannot use its usual tools like fines, liens or criminal prosecutions to punish people who do not pay" the penalty.  

 

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