October 1st, 2013 marks the official opening of the state health insurance exchanges, open marketplaces where residents of the U.S. can go to customize and purchase varying levels of health insurance under the Affordable Care Act.
The exchanges are one of the main aspects of the health law enrollment, and while millions of individuals will now have the option of health care coverage, some are still hunting through Obamacare facts, wondering if the program is mandatory and what the penalties are.
“I’ve never seen the point in paying someone else thousands of my dollars so they can tell me what will and won’t be covered when I go to the doctor,” Penny Ellis, a 45-year-old mother of three told Saludify in a group discussion about Obamacare facts. “It’s my money. It should cover what I want it to cover, and the only way it is going to do that is if I just save up on my own for medical costs.”
Ellis and a few other members of the uninsured group interviewed by Saludify held fast to this strategy, acknowledging they would have to pay a fine if they did not purchase health insurance privately or through one of the state exchanges.
“I think it’s ridiculous that, even though I’m saving on my own, I’ll have to pay out a fine at the end of the year because I don’t have formal insurance,” Gerald Whitmore, a widowed, 64-year-old mechanic said during the Obamacare facts discussion. “If I can save up my money on a shoestring budget, there’s no reason other people can’t do the same thing.”
Obamacare facts: Enrollment is mandatory
The penalty Whitmore speaks of refers to the tax penalty which will be assessed for each family or individual who remains uninsured after the year 2014.
The penalty will be a part of the annual tax filing season, and the only way to avoid it is to not file taxes despite eligibility (a federal offense), or to meet one of the criteria for exemption.
Important Obamacare facts:
Individuals have until March 31st, 2014 to go without health insurance without being assessed a penalty.
After that date, lacking health insurance will result in a tax penalty on the 2015 IRS tax forms.
Other Obamacare facts on who can legally avoid the tax penalty associated with the Affordable Care Act include:
- Undocumented immigrants,
- Members of certain religions,
- Individuals who are incarcerated,
- Native Americans,
- People with a family income below the taxable level,
- Those who must pay more than 8 percent of their income for health insurance.
Other individuals who have minimal health coverage will also be able to avoid the health tax penalty such as those who were members of:
- A veteran’s health program,
- Some plans offered by employers,
- Minimal insurance purchased at the state’s Bronze Level,
- Individuals grandfathered into a health plan before the Affordable Care Act was in effect.
This means that Obamacare enrollment is mandatory; however, you can chose not to participate but will be subject to pay the tax penalty.
Other important Obamacare facts include rates of penalties.
Currently, the penalty rates are as follows:
Starting in the 2014 tax season:
$95 per adult and $47.50 per child, with a maximum health tax penalty of $285 per family or 1 percent of family income, whichever is greater.
2015 tax season:
Numbers increase; the new health tax penalty will be established at $325 per adult and $162.50 per child, with a maximum health tax penalty of $975 per family or 2 percent of family income, whichever is greater.
Among the other Obamacare facts you should become aware of is that the individual mandate (tax penalties) goes into full effect during 2016.
Uninsured individuals will then pay $695 per adult and $347.50 per child, with a maximum penalty of $2,085 for a family or 2.5 percent of family income, whichever is greater.
To avoid the tax penalty, enroll in a health insurance exchange program by the end of March, 2014.
“The most daunting aspect is that people still don’t know enough about what’s going to change in the law and don’t have enough information — still have some misinformation,” Health and Human Services Secretary Kathleen Sebelius told reporters in June. “We have the next couple of months laid out with a very busy and engaged schedule to make sure that we’re ready for marketplace launch on Oct. 1, with open enrollment. It’s a huge undertaking across the country, and I’m confident we’re on track to get it done.”
What happens if you don’t pay tax penalty?
Among the Obamacare facts most people are not aware of is that, even though you are required to have health insurance or pay a penalty tax, the repercussions if you don’t pay aren’t as strict as you may think.
For most individuals getting a return back on taxes, any amount owed for a health insurance tax will be taken from the possible return.
Individuals who are not expecting a return, however, are still held accountable to pay penalty. If they don’t pay, the Affordable Care Act actually prevents the IRS from taking normal legal action to collect that money, prohibiting the organization from garnishing wages or confiscating property.
“In the case of any failure by a taxpayer to timely pay any penalty imposed by this section,” Section 1501 of the Affordable Care Act reads, “Such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.”
This means an unpaid tax penalty will be rolled over into next year’s money owed, and as the amount increases, the IRS is allowed to only charge interest. Still, no legal course is available to collect that money if it remains unpaid even for decades.
The loophole regarding the collection of unpaid health tax penalties is one aspect of Obamacare which may be altered in the upcoming years.
To have insurance or not to have insurance?
“I got a quote for health insurance and it was $1,700 a month with a $1,200 deductible,” Amy Snedecker told Saludify. “I thought Obamacare was supposed to be affordable?”
According to Snedecker, she and her husband made just over the monetary allotment to qualify for assistance, so all of her health care costs through the insurance exchanges would be out-of-pocket.
Unlike Whitmore and Ellis, however, Snedecker was living month-by-month, with little cash to set aside for health care costs; $1,700 a month is not an option for her and her husband.
“We’re just going to have to pay the penalty,” she said. “It’s better than paying all that money out monthly and never seeing it again. We want health coverage, but at that price it’s not really peace of mind, it’s just more stress.”
Other important Obamacare facts for you to beware of: health insurance costs through the exchanges will be offset by tax credits available through January of 2014. These credits will pay 72.5 percent of qualified health insurance premiums for those who are eligible.
Not everyone is eligible, however.
Make sure you know your Obamacare facts before you jump in looking for all the Affordable Care Act benefits.
Just as with the tax penalty, there are eligibility requirements for tax credit allotments as well.