News Column

Larger penalties loom for uninsured who don't sign up for Obamacare

June 30, 2014

By Liz Freeman, Naples Daily News, Fla.

June 30--NAPLES -- Uninsured Floridians who don't sign up for health coverage under the Affordable Care Act, be prepared: Heftier penalties await you when tax time rolls around in 2016.

People who procrastinate filing their income tax returns in 2015 may find out about the bigger penalty too late to fix it because of enrollment deadlines.

The one saving grace may be qualifying for a penalty exemption.

"It is important to let people know about the penalties because they are real," said Lynne Thorp, a health plan navigator for the Health Planning Council of Southwest Florida.

At a recent national conference in Washington, D.C, of Enroll America, a nonprofit that tracks health care enrollment, Thorp learned about a predicament that will apply to the uninsured who don't qualify for a penalty exemption.

Tax preparers may find themselves as the bearer of bad news, Thorp said.

Here's how it works:

Anyone who didn't enroll in a health plan for coverage in 2014 faces the penalty of whichever is greater -- $95 or 1 percent of their taxable income, according to the law's guidelines. The penalty will be levied when someone files their income tax return for 2014, usually in early 2015.

The first-year penalty may not amount to much, but that will change when it comes to a second-year penalty.

Someone who meets with a tax preparer after Feb. 16, 2015, may be asked if he or she enrolled in a health care plan for 2015, the second year of the requirement. If the answer is "no," the penalty will be much bigger when they do their 2016 tax return and there is no way to reverse course by signing up for a plan at that point, Thorp said.

That's because open enrollment for coverage in 2015 will be from Nov. 15, 2014, to Feb. 15, 2015, so the opportunity will have passed, Thorp said.

The second-year penalty will be the greater of $325 or 2 percent of someone's taxable income, according to law's guidelines.

The only way around the closed enrollment is a change in one's life circumstance, such as a job change, she said.

Currently, she sees a handful of people each day who fit that category.

In general, people are aware the penalty exists for not signing up for a plan, and some may have decided they can live with it.

"There were some who came in (for counseling) who found they did not want to put (a plan expense) in their budget and it is cheaper to pay the penalty," she said.

Debra Knight, a 53-year-old hairdresser in Naples, didn't sign up for coverage this year and that isn't likely to change, she said. She knows about the penalty.

"I don't know how much it's going to be, but it's definitely cheaper than something I can't afford to begin with," she said. "The thing is, either way you look at it, we are supposed to be the land of the free. For anyone to give me an ultimatum because I am not conforming to it, we might as well be in Russia."

Jody Ray, a navigator with the University of South Florida in Tampa, said that when she met with clients during the 2014 open enrollment period, she found many were aiming to avoid the penalty.

"I saw that more as we got nearer the deadline," Ray said. "More folks seemed cognizant of a penalty even if they didn't know the exact amount. The penalty became a motivating factor. I think navigators saw that in all states."

The Nov. 15 to Feb. 15, 2015, enrollment period for the second year is shorter than what was provided during the first year. The first-year enrollment deadline was originally March 31, 2014, but the deadline was extended to May 1, 2014.

"Deadlines will be really tight and folks will have to act quicker to meet them," Ray said.

The Congressional Budget Office estimated in early June that 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty.

The exemption will apply to people whose incomes are at or below the federal poverty guidelines, for those whose insurance premiums would exceed 8 percent of their income, and for those with a short coverage gap of less than three consecutive months. Additional exemptions will apply to certain non-citizens and members of a health-care sharing ministry.

All told, the Congressional Budget Office estimates 4 million people will pay a penalty in 2016 because they remain uninsured, and the government will collect $4 billion, according to the agency's most recent estimate released June 14.

That's revised from a Congressional Budget Office report in September 2012 when it projected 6 million would be uninsured in 2016 and the government would collect $7 billion in penalties.


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