Obamacare Penalty May Not Be High Enough For Middle Incomes

Even though penalties under the Affordable Care Act for not having health insurance jumped significantly this year, they still might be too low to attract Americans to signup for subsidized coverage, a new analysis shows.

Avalere Health, a Washington health policy and consulting firm, said some middle income healthy individuals would rather pay the fine when they weigh it against spending a few hundred dollars more on insurance.

The fee increased to $325 per adult or 2% of income for 2015, according to healthcare.gov. That compares to a fee of $95 per adult or 1% of income for those who went without coverage last year.

“Individuals earning more than double the poverty level may continue to forgo coverage since paying the fine is still much more affordable than purchasing insurance,” Caroline Pearson, senior vice president at Avalere, told journalists during a panel discussion Friday on exchanges at the Association of Health Care Journalists annual meeting in Santa Clara.

Avalere looked at such a person for its analysis, citing a 27-year-old who makes $23,000 a year. Here’s a link to the analysis and cost comparisons to income.

“If he did not buy insurance, he would pay $230 in penalties – $619 less than if he had purchased coverage,” Avalere said in its report. “However, with mandate penalties rising in 2015, if the same individual chose to stay uninsured in 2015, he would spend only $391 more on insurance than if he had paid the penalty.”

With such scenarios likely common, it’s no wonder just 68,000 Americans took advantage of the recent special open enrollment period for those who didn’t enroll in the regular open enrollment period that ended in February and faced a penalty for not signing up for 2014 coverage.

“That lackluster uptake of the special enrollment period is driven, in part, because for most people individual mandate penalties are much lower than actual costs of coverage,” Avalere said in a statement accompanying its report.

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Source: Forbes Health