Did you decide to forgo health insurance and pay the Obamacare penalty? If so, you might want to rethink your decision as the fine rises.
The Obamacare penalty goes up in set amounts each year until 2016, after which it rises with inflation. The fine is calculated as either a flat rate or a percentage of income, whichever is greater, according to HealthCare.gov.
And in 2015, the maximum dollar amount an individual or family would pay using the flat rate method of calculation will more than triple. For an adult, the penalty goes from $95 to $325 and for a family from $285 to $975.
"That's a huge jump," says Don Silver, an attorney and author of "Obamacare 2015: The Best Strategies for Saving Your Money and Protecting Your Health Under the Affordable Care Act."
"It was an easier decision in 2014 to skip insurance and pay the penalty," Silver says. But in 2015, he says, "it becomes a little dicier."
Who has to pay the Obamacare penalty?
The Affordable Care Act's (ACA) individual mandate provision requires most Americans to buy health insurance that meets minimum requirements, including coverage of the essential health benefits -- 10 categories of care that include maternity care, prescription drugs and mental health.
Most Americans who don't get health insurance that meets ACA requirements have to pay a penalty.
- Two percent of your annual household income (above the filing threshold, which is a little over $10,000 per wage earner or a little over $20,000 for a married couple filing jointly), with a cap set at the average premium for a bronze plan.
For 2015, if plan costs increase 6 percent, the average cost of a bronze plan will be about $2,595, and the cap for a family of more than five will be about $12,975. That level of increase is consistent with premium growth trends, according to the Tax Policy Center, an organization that provides expert tax policy analysis.
- OR, a flat rate of $325 per adult per year, plus $162.50 for each child under 18, with a cap of $975 per family. (In 2014, it was $95 per adult and $47.50 per child with a cap of $285 per family.
Want to find out monthly Obamacare premiums in your state? Check out HealthPocket's pre- and post-Obamacare rate study.
People who DON'T have to pay the Obamacare penalty
There are exemptions that allow some Americans who lack health insurance to avoid paying the penalty. Reasons for exemptions include:
- Unaffordable coverage, which happens when a group plan at work or a bronze plan in the marketplace would cost more than 8 percent of your household income.
- A short coverage gap, meaning you lacked insurance for less than three consecutive months of the year.
- Status as a member of a federally recognized Indian tribe.
- Membership in certain religious sects.
There's also an exemption category that includes a list of hardships. For example, you might be eligible for an exemption if you experienced circumstances that prevented you from signing up for a plan
These include homelessness, eviction, foreclosure, domestic violence or death of a close family member.
Consumers who don't want to buy health insurance or pay the penalty might be most likely to find a way out by studying the list of hardships, Silver says.
There are 14 hardships mentioned in the law, he says: "And some are extremely broad."
Obamacare penalty increases in 2015
If you decide to go without health insurance in 2015, how much will you have to pay? Here are three hypothetical case studies for consumers at different stages of life.
1. The single millennial.
A single, 25-year-old woman making $45,000 a year, with an adjusted gross income of $34,700 after exemptions and deductions, would pay $488 in 2015 (up from $246 in 2014). In 2016, the number would jump to $604, if her income level remained the same.
2. The middle-income family.
A family of four making $65,000 a year -- right around the median U.S. household income -- with an adjusted gross income of $44,400, would pay $975 in 2015 (up from $285 in 2014). In 2016, they'd pay $2,085 if their income stayed the same.
3. The high-earning couple.
A couple in their mid-50s with grown kids not living at home and a household income of $150,000 a year, with an adjusted gross income of $129,400, would pay $2,176 in 2015 (up from $1,091 in 2014). In 2016, that would jump to $2,708 with no increase in income.
Want to see exactly how much you’d pay? Use insuranceQuotes.com’s new Obamacare penalty calculator to find how much your penalty will be in 2014 and 2015.
Those fines might seem hefty, but they're light enough that some Americans likely will go without health insurance, says Amy Bach, executive director of United Policyholders, an insurance consumer advocacy group.
Should you get insurance or pay the penalty?
In a 2013 Princeton Survey Research Associates International survey commissioned by insuranceQuotes.com, 4 out of 10 Americans said they'd rather pay up than buy insurance.
If you’re weighing the cost of a penalty against the cost of insurance, you should know that plan costs shouldn’t rise much and might even drop in 2015, depending where you live, according to an analysis of 2015 rates by the Kaiser Family Foundation (KFF), a nonprofit that studies national health issues.
The following example rates don’t factor in the tax credits. According to KFF, about 85 percent of consumers buying health insurance plans through the marketplace are receiving tax credits.
In 2015, a 40-year-old nonsmoker making $30,000 a year will pay $257 a month, which is $3,084 a year, for the second-lowest cost silver plan in Los Angeles. Her estimated penalty would be $325 in 2015.
In New York City, the same person will pay $363 a month, or $4,356 a year.
And in Nashville, the person will pay $205 a month, or $2,460 a year.
In the NYC case, for example, it may seem like a no-brainer for a person to pay a $325 one-time penalty instead of buying an insurance plan that will cost $4356 a year. However, experts advise against skipping insurance as it may end up hurting you in the end.
This is because if you get sick and don’t have any insurance, you can face a range of problems, including getting substandard medical care and racking up enormous bills that can lead to bankruptcy, Bach says.
Also, paying the fine gets you nothing in return, experts say.
Silver says, "The problem is, you don't know everything that's going to happen to you in the coming year: Are you going to get hit by a car, have a skiing accident or catch a disease?"
If you decide to go without insurance, the fine will be collected by the IRS, which can subtract the amount you owe from your tax refund, Silver says.
However, the IRS cannot put a lien on your property – a claim against your home, for example, that must be paid before you can refinance or sell – or seize money from your bank accounts to collect the penalty, Silver adds.