Who Will Pay Obamacare Penalties?

The Affordable Care Act requires most Americans to have health insurance or pay a penalty. How many will pay? Some 3.9 million in 2016, according to a new estimate (pdf) from the Congressional Budget Office.

That’s a small chunk of the 30 million people who will remain uninsured. Most will be exempt from the tax penalties for one reason or another. Immigrants who are in the country illegally can’t get Medicaid or insurance subsidies and are exempt from the penalties. So are people who earn too little to file tax returns and those who would have qualified for Medicaid but live in states that chose not to expand the insurance program for the poor. Others will get exemptions for hardship.

The mandate, which is intended to keep people from buying health insurance only when they get sick, inflames Obamacare opponents. The penalties start relatively small and increase over the next two years. People who skip insurance in 2014 will pay $95, or 1 percent of income, whichever is greater. By 2016 those numbers rise to $695, or 2.5 percent of income, and they’re tied to inflation after that. The CBO expects the penalties to bring in about $5 billion a year from 2017 to 2024.

Almost one-third of the 3.9 million people the CBO estimates will pay fines in 2016 live in middle and high-income households, earning at least $99,000 a year for a family of four. And because of their higher incomes, those people will pay 61 percent of the total penalty dollars.

That may be because people at this income level—a bit more than four times the poverty level—don’t qualify for any subsidies under Obamacare. It’s what’s known as the subsidy cliff. Which side of that cliff your income is on can change what you pay for insurance by thousands of dollars. Healthy people who earn just a little too much to get help paying premiums have a bigger incentive to go uninsured and pay the penalty, compared with folks who qualify for subsidies.

6 June 2014 | 4:45 pm – Source: businessweek.com

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