Taxes are bad enough when you know they’re coming—and much worse when they arrive unexpectedly.

As the Affordable Care Act enters its second year of operability, a key and controversial element of the plan will begin to affect several million Americans for the first time. People who didn’t have health insurance during 2014 may soon have to pay a penalty fee that starts at $95 and goes up based on how much you earn. Some Americans know about the penalty, and they’ve budgeted for it or at least accepted its inevitability. But several million others could be in for a rude surprise when Washington assesses a fee they didn’t even know was coming.

The uninsured rate has fallen since Obamacare, as the ACA is known, went into effect at the start of 2014. But there are still roughly 40 million adult Americans who lack health insurance, according to Census Department data. A recent poll by Gallup shows that about 55% of the uninsured plan to get insurance, while 35% say they’re willing to pay the fine for not having coverage. That leaves 10% of the uninsured — 4 million people or so -- who appear to be unaware they need to have insurance or pay a penalty. Plus, some of the 55% who say they plan to get coverage inevitably won’t, including a portion who probably don’t know they’ll get stuck paying a penalty.

The “individual mandate” requiring most adult Americans to have health insurance is an essential element of the ACA because it enlarges the pool of people who are insured and spreads healthcare costs as widely as possible. Without the mandate, there would be a larger portion of sick people and a smaller portion of healthy people covered by insurance, which could make coverage prohibitively expensive for those who need it most. Yet the mandate is unpopular and it’s likely to be targeted for elimination by Republicans who will control both houses of Congress for the next two years—and who well understand that the whole law could collapse if the mandate isn’t in force.

One of the biggest remaining tests for Obamacare will come in early 2015 as people without coverage cope with the penalty fees. There are exemptions for low-income workers and others who would have to pay more than 8% of their income for a health insurance policy, which is considered prohibitively expensive. About 60% of the uninsured are poor and likely to qualify for an exemption. But they have to know how to claim it, and for all the attention Obamacare has generated, a surprisingly large portion of the population knows little or nothing about the law. Nearly 30% of those without insurance don’t know they’re required to have it or pay a penalty, for instance. And 65% of the uninsured say they’re not familiar with the healthcare exchanges set up to offer policies, which means a lot of people without insurance don’t know how to get it.

It’s up to the IRS — possibly the least popular government agency — to assess penalties and collect payments. The IRS likely won’t be sending agents to doorsteps demanding payment. Its only method of collecting will be to withhold the money owed from tax refunds issued in 2015, for calendar year 2014.



It’s not clear how the IRS will collect from people who don’t get a refund. Still, it will require a deft touch by the IRS to collect money enforcing an unpopular law strongly opposed by the majority party in both houses of Congress, without triggering a furor. At a minimum, expect rhetorical fireworks.





For Americans unsure how the mandate applies to them, there’s plenty of information available from the government itself and from many third-party web sites. The law was designed to make it cheaper for most people to buy insurance than pay the penalty fee, which rises from $95 per person or 1% of your income (whichever is greater) in 2014, to $325 per person or 2% of your income in 2015. (In 2015, the maximum penalty is the national average premium for a bronze plan.)



At some point, there may be only a small band of die-hard Obamacare opponents taking a painful financial hit for the privilege of foregoing insurance. But first, penalty fees will sting many others as the nation discovers how Obamacare really works.





Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.