What is the penalty for not having Obamacare?
The penalty in the Affordable Care Act is the shared responsibility individual fee. It is not caused by not participating in Obamacare; we are all free to take part or not. The penalty applies when one has no insurance, deficient coverage, or not exempt from the law. One can buy insurance anywhere; if it meets the law’s requirements, then there will be no penalty. The law exempts certain persons; for example, it exempts persons that do not have to file tax returns. Comparison shopping is important when choosing policies that meet the requirements of the individual mandate. Whether shopping on the Obamacare exchanges or outside of the Obamacare system, comparison shopping will focus on the parts that are most important to the consumer. Start comparing health insurance rates now by using our FREE tool above!
Insurance Reform and Individual Mandate
The ACA made fundamental reforms in health insurance coverage. It requires insurers to provide essential benefits and to offer insurance without regard to prior health, gender, and other status issues. To make these changes effective for improving health and lowering the nation’s costs of health care, a device was needed to encourage everyone to participate. The individual mandate requires everyone to participate or pay a tax to cover a fair share of costs for benefits provided to all.
Exemptions from the Individual Mandate
There are two types of exemptions from the individual mandate: regular exemptions and hardship exemptions. The lists below briefly describe the regular and hardship exemptions.
- Unaffordable Insurance – the rules exempt individuals and families when the costs of insurance would exceed eight percent of the annual income.
- Income below Filing Threshold- the rules exempt individuals from the mandate whose income is below the threshold for filing tax returns.
- Financial Hardship- the government recognizes many types of financial hardships; the essence is some involuntary situation that interferes with maintenance of the insurance coverage.
- Short Coverage Gap Exemption– those who experience a short-term gap pf three months or less will have an exemption if they resume coverage.
Compliance with the Mandate
The individual mandate requires health insurance that meets the minimum quality elements in the Affordable care Act. The reform goals of the Act intended to eliminate health insurance practices that created poor outcomes for consumers. These included policies that insurers could terminate upon illness, and that had unreasonably low annual and lifetime limits.
The ACA requires widespread participation so that there would be overall better health and lower healthcare costs for Americans.
To avoid the penalty, one must either obtain minimum essential coverage during open enrollment and maintain it throughout the year or get an exemption.
Healthcare Penalty in the Tax System
The Internal Revenue Service administers the individual mandate tax provision and sets the exemption policies. The purpose of the individual shared responsibility penalty is to promote healthcare coverage. The exemptions include financial hardship and low income. The penalty assesses each month without coverage and credits each month of coverage.
- For 2014 – the penalty is $95 per adult, $47.50 for minors,
- For 2014 the family limit of $285.00
- For 2015- the penalty is $325 per adult, $162.50 for minors
- For 2015- the family limit is $975.00
- For 2016- the penalty is $695 per adult and $347.50 per child
- For 2016 – the family limit is the greater of $2,085 or 2.5 percent of adjusted household income.
The power to tax is one of the legal principles of the Affordable Care Act. The law was intended to use the tax powers to strengthen health care services and control costs over a long term of application. The costs of treating preventable illnesses in the United States were a driving force in the consistent high annual increases in the nation’s health care spending. The individual mandate is a device to encourage universal participation in improved health coverage. In passing the ACA, the Congress made a judgment that without effective, widespread health insurance coverage, health care costs would continue to rise, and the levels of overall health would not improve.
The individual coverage mandate in the Affordable Care Act will cost non-compliant residents a substantial amount of the costs of coverage through the authorized exchanges. The convenience of Obamacare coverage and regular payments will be more appealing than the expense and difficulty of paying the penalty for most taxpayers. The achievements of the law include covering additional millions of residents with health benefits through insurance. The important features of a health insurance plan go beyond the preliminary focus on price, deductibles, premiums, and coverage. Comparison shopping will highlight the features of greater importance to consumers when deciding to purchase insurance rather than paying the penalty. Start comparing health insurance rates now by entering your zip code in our FREE tool below!