PPACA: Should You Get Health Insurance or Pay a Fine?

Now that 2014 is around the corner, it’s time to seriously start looking at purchasing health insurance, if you don’t already have it. The Patient Protection and Affordable Care Act (PPACA), which is also sometimes called Obamacare, has been phasing in since 2010, and will continue to phase in through 2017. However, the provision that has received the most press, the requirement that everyone purchase health care coverage or pay a fine, goes into effect next year.

It’s time for you to start thinking about your health care costs, and trying to decide if you should go ahead and buy health insurance coverage, or if it makes sense to simply pay the fine. In some cases — at least for 2014 — it might actually be cheaper to just pay the fine if you don’t already have health care.

How Much Will Health Insurance Cost You?

The first thing you need to do is figure out how much health insurance will cost you. Before you assume that you have to buy a health insurance policy, though, it’s a good idea to see if you will qualify for Medicaid. Part of the PPACA is money for states so that they can expand their Medicaid programs. Check with your state to see if it has participated (it’s not mandatory for states), and if you are now eligible for Medicaid, even if you weren’t before.

If you still can’t qualify for Medicaid, you can move on to running the numbers on purchasing health insurance. One of the tools you can use estimate your costs is the subsidy calculator offered by the Kaiser Family Foundation. Those who make up to 400% of the federal poverty level are eligible for a subsidy from the government that can help offset health insurance premiums. Use the tool get an idea of what you will have to pay for coverage.

The calculations offered are based on a Silver-level plan bought on a health insurance exchange. These health insurance exchanges are designed as marketplaces where those who can’t afford (or don’t receive) coverage through their employers, or who are self-employed, can purchase health insurance. There are three different levels of plans: Gold, Silver, and Bronze. A Gold plan has higher monthly premiums, but comes with more benefits and lower out of pocket expenses. A Bronze plan has fewer benefits, and requires you to pay more out of pocket, but the monthly premiums are lower. The Silver plan falls in between.

KFF’s subsidy calculator will automatically help you see how much you can expect to pay if you purchase a Silver plan. However, after showing you the numbers for the Silver plan, you can also see a description of what to expect under the Bronze plan. In many cases, if you have to pay a small premium for the Silver plan, you don’t have to pay anything for coverage under a Bronze plan.

Once you know how much you will have to pay to get coverage, you can decide whether or not the fine is worth it. For 2014, the maximum fine you pay is $95 or 1% of your income, whichever is greater. For some, the fine is cheaper than coverage. (If you qualify for a subsidy that makes Bronze cheaper, it can make sense to get coverage, since some coverage for nothing is better than paying a fine and having no coverage.)

Realize, though, that the fine increases over time. Later, it might not be cheaper to pay the fine, especially if your income increases to the point where 1% is more than your subsidized premiums.

Carefully run the numbers, and then decide what is likely to work best for you.