On January 1, 2014, the new requirement for mandatory health insurance will come into effect, requiring that all American citizens have become adequately insured. Obamacare, as it has come to be known, is not optional; those who fail to be insured come the start of next year will face penalty charges.
What are the penalty charges for not being insured?
- $95 per adult
- $47.50 per child
Furthermore, if an individual has insurance but their children whom are listed as dependents so not, additional penalties may apply for failing to insure these minors.
The penalty charges will rise each year, with non-adherents needing to pay the greatest of either a fixed penalty or a percentage of their income, as follows:
- In 2014 – $95 per adult or 1% of household income
- In 2015 – $325 per adult or 2% of household income
- In 2016 – $695 per adult or 2.5% of household income.
For children, the penalties will be reduced by 50%. There will be a cap on the total amount of penalties that can be accrued by any household. This cap with equate to the annual cost of a basic health insurance policy through the state health insurance exchange.
What is the point of the penalties?
The fact that the total amount of penalties that can be charged is the same as a basic health insurance policy does suggest that the penalties are more of an incentive to insure rather than a punishment for not insuring. It will work out better for individuals and households to bite the bullet and arrange coverage than amass numerous penalties, especially if they remain uninsured beyond 2014 when the penalty charges rise. Collected dues from penalties will be funneled back into the healthcare system.
How will penalties be collected?
Enforcement will be undertaken by the Internal Revenue Service, but the focus will be more on encouraging people to get insurance rather than heavily enforcing penalties with aggressive collection techniques. Nevertheless, amounts owed will be collected through tax returns.
How many Americans may be uninsured in 2014?
The exact figure is unknown, however, in 2012 an estimated calculation made by the Congressional Budget Office projected that in 2016 there will be 30 million Americans without health insurance that is compliant with the Obamacare guidelines. Of these 30 million, the estimate suggested that 6 million of these individual will face penalties for being uninsured.
How can a penalty be avoided?
Individuals and households can ensure that they don’t receive a penalty by making sure they have health insurance coverage that meets the law’s new minimum threshold. This is called “Minimum Essential Coverage.”
What are the rules for Minimal Essential Coverage?
The rules are that this type of insurance as to be:
- Offered by an insurer or small employer that offers health insurance as part of a benefits package
- This means that it will be the new minimal standard than individual insurers make available in 2014, as well as the mandatory basic package offered by employers from 2015
Consumers should be aware that if they take out insurance in 2014, it will more than likely meet the law’s minimum requirement. If, however, an insurance policy only gives limited benefits, the minimal essential coverage threshold may not be satisfied. For example, if the health insurance policy is only for dental treatment, this is not sufficient coverage and the policy holder may face a penalty for not having the requisite level of health insurance coverage.
Who does not need to get health insurance in 2014?
According to the Obamacare law, The Affordable Care Act, there are certain categories of people who will not be mandated to have health insurance coverage in 2014. This includes Americans on low incomes.
If an individual has an income that is too low for them to file a deferral tax return, they will be exempt from having to get health insurance for the next year.
The categories of people exempted from getting health insurance are, therefore:
- People on low incomes
- People whose religious beliefs prevent them from accepting insurance benefits
- Members of a recognized health care sharing ministry
- Indian Tribes that are Federally recognized
- Those meeting the criteria for hardship exemptions
- Those who are not American citizens, lawful aliens or U.S. nationals
- Inmates in penal institutions i.e. jails, prisons and correctional facilities
- Those with short gaps in between being insured of 2 or 3 months
Who does need to get health insurance in 2014?
It comes down to the issue of affordability and meeting the threshold. An individual must get health insurance if they meet the threshold of 8% of annual income. This is for the cheapest policy offering minimum essential coverage.
In 2014, it will therefore be much cheaper and cost effective to get minimal coverage rather than pay penalties and remain uninsured. For more information about the Affordable Care Act, visit www.healthcare.gov.
Download this infographic.