One component of the recently enacted Affordable Healthcare Act, is the penalty on those who chose not to buy health insurance. These penalties have been referenced frequently of late, usually in the following way; “It’s only a $95 fee, right?” It seems that this is what the popular media would have everyone to believe; however there is a little more it than that. These are the rates for the next three years, which will continue to rise in years ahead:
- 2014: $95 per adult and $47.50 per child (up to $285 per family) or 1.0% of family income – whichever is greater.
- 2015: $325 per adult and $162.50 per child (up to $975 per family) or 2.0% of family income – whichever is greater.
- 2016: $695 per adult and $347.50 per child (up to $2,085 per family) or 2.5% of family income – whichever is greater.
How does this affect you? If you are enrolled in a qualified health insurance plan, this fee does not apply to you. If you are somebody who does not currently carry health insurance, you are going to have to do two things: math and thinking. The “math” will be to calculate your fee based on your income (if more than $9,500 annually) using the information above. The “thinking” involves weighing the one-time fee which garners no benefit with a monthly health insurance premium that provides protection in the event you (or somebody in your family) require medical care.
Economically, a one-time fee for the year 2014 may seem to outweigh the need for health insurance. However, as the years progress, the fee will continue to increase, and at some point, you may be paying as much if you do not have insurance as you would if you did. At what point you decide to pay a little more for coverage versus no coverage is something you will need to determine.
How is the fee assessed? The legislation ties different government agencies into the administration of the healthcare system. When an enrollment is processed with one of the newly formed Healthcare Exchanges around the country, the information is forwarded to other government entities. The Department of Homeland Security is provided with the necessary information to ensure that the applicant is a valid U.S. Citizen. The Internal Revenue Service is then notified so as to not charge a fee on that applicant’s income taxes. Starting in the tax year 2014, when filing taxes, it will be determined whether or not a person participated in a qualified health plan. If so, then no fee will be charged. If not, then the fee will be assessed on that person’s taxes. The fee will either increase the amount of taxes you owe or reduce any rebate you may be entitled to receive.
It is easy to see that something that is reported as “only a $95 fee” can quickly become complicated and compounded. As we all face the uncertainty of the constantly changing healthcare industry in the coming years, the Merriam Insurance Agency would like to be your guide. Please let us know any questions you may have or the rumors you have been hearing so that we can make sure you are adequately informed as we all traverse this tough terrain together.
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