Obamacare Deadline Approaches: Will You Pay a Penalty?

One of the biggest controversies in recent years is the implementation of the Affordable Care Act, which is commonly referred to as Obamacare. The ACA requires that everyone — with a few exceptions — get insurance coverage.

Those who have Medicaid or Medicare coverage, or who are covered already through other plans, don’t need to get new coverage (unless their plans don’t come up to scratch and are no longer offered). If you don’t have health coverage, and you don’t qualify for an exemption, you have until March 31, 2014 to sign up for a plan.

It’s possible to go to a health care exchange and sign up. You might even qualify for a subsidy to help you pay for the plan. If you decide not to get a plan, you could be hit with a penalty when you file your taxes next year.

How Much is the Obamacare Penalty?

For this first year of compliance, the Obamacare penalty is at its lowest level. Each adult in your household pays $95 or one percent of your income, whichever is higher. There is also a charge of $47.50 for each child under the age of 18 without insurance. The penalty maxes out at $285 per family.

In some cases, at least for this first year, paying the penalty is cheaper than getting insurance, depending on what kind of subsidy you qualify for on the health insurance exchanges. However, you still won’t be covered, and if something unexpected happens, you could be financially devastated with medical bills.

The penalty doesn’t remain low, though, so even if you decide to chance it this year, it might be best to get health insurance coverage before the penalties start rising. In 2015, the penalty jumps to $325 per adult or two percent of family income, and in 2016 it jumps even higher, to $695 per adult, or 2.5 percent of family income. Fines related to children go up to $347.50 per child in 2016.

The Congressional Budget Office estimates that fines in 2016 could result in $7 billion worth of fines.

Without subsidies for coverage bought through the health care exchanges, some families might still prefer to pay the fine, since it could be expensive to get monthly insurance coverage. However, it’s important to remember that the premiums listed on the exchanges are before the subsidies, so if you qualify for help, you aren’t going to pay such a big premium. In some cases, you might be able to get health care coverage cheaper — after your subsidy is applied — than paying the fine. In that case, you are better off, since you have affordable coverage and you reduce the risk related to medical bills.

As you consider your health insurance options, run the numbers. Figure out what you will pay if you are stuck with a penalty, and compare that with your health insurance premiums with subsidy. A number of middle class consumers qualify for the subsidy, so don’t write off the health coverage as unaffordable until you have actually looked at the real cost and run the numbers for your individual situation.