Buying Health Coverage vs. Paying the Fine

One of the primary features of the Affordable Care Act (ACA) is its individual mandate, which requires everyone to carry insurance or pay a fine. This fine is called the shared responsibility payment and is intended to encourage people to purchase health insurance so that the cost for benefits is spread out over most of the population. The individual mandate ensures that coverage stays affordable whether you’re healthy or chronically ill.

In the first few years of Obamacare, the penalty fine for not carrying health insurance was not very high. This tempted the healthier portion of the population to determine if the cost of obtaining coverage was truly worth it. They could pay a few hundred dollars a month for coverage or pay a fine of a few hundred dollars for the entire year. Young, healthy individuals are more likely to choose the fine because it’s less expensive in the short term. Under Trumpcare, the individual mandate might be eliminated, which raises additional questions on how insurance can remain affordable nationwide.

Paying the Current Penalty

The penalty for 2016 nearly quadrupled over the initial penalty fine, but it’s still not high enough to compensate for premium prices. At $695 or 2.5 percent of a person’s taxable income, whichever is higher, the fee is still a far cry from the estimated $2,500 or more per year for a bronze plan, which doesn’t encourage many to purchase coverage. According to the Kaiser Family Foundation (KFF), the penalty should be at least $969, but even that amount falls short of premium payments.

People who choose to pay the penalty rather than pay for insurance vary by income according to health centers that help with low-income enrollment. These centers have been concerned that unless the penalty becomes higher than premiums, nothing will change. The U.S. Department of Health and Human Services (HHS) estimated 2 to 4 percent of consumers would choose to pay the penalty in 2016. People with higher incomes are less affected by the threat of a penalty or problems maintaining coverage. Those with an income lower than the tax filing threshold are not subject to a penalty.

Buying Health Insurance

When you’re young and healthy, getting old, ill or injured seems like a remote possibility. Unfortunately, getting sick and injured do happen, sometimes at the worst possible moment. If you get hurt or become ill, being prepared makes all the difference. One unexpected accident can leave a person financially devastated, never mind a rare diagnosis with extended medical consequences. Unpaid medical bills account for the majority of bankruptcy cases in the U.S. When emergencies strike, having health insurance can shield you from the full financial impact.

Weighing the Costs

Contributions to premiums for health insurance by those who are healthy now help average the medical costs for those who need it most. One day, no matter how well we take care of ourselves, it will be our turn. Penalty or not, maintaining health insurance benefits society as a whole. When you’re weighing the cost of coverage, it’s important to consider the social costs as well as the long-term benefits. Plus, there are options under Obamacare that can help you afford the monthly payments if you need it. Trumpcare may eliminate this assistance.

Right now, if your household income is under 400 percent of the federal poverty line, you qualify for a cost subsidy or tax credit. These subsidies might not be around once Trump and a Republican Congress start reshaping the health care law.

If you’re on the fence about coverage because you’re young and healthy, or wealthy enough to afford it, check out this example of how to weigh the cost of the tax penalty against the cost of insurance premiums, copays and deductibles. In 2016, the penalty fine for not having coverage was the higher of 2.5 percent of your household taxable income, or $695 per uninsured adult and $347.50 per uninsured child under 18. You can estimate your penalty fee using this tool.

When the ACA is replaced by Trumpcare with its many possible provisions under consideration, and the individual mandate is repealed, pre-existing conditions exclusions return for those who do not maintain consistent coverage. The cost to purchase benefits when illness or injury strike will be extremely high or completely unaffordable. Suddenly, those with medical problems are forced into a situation where higher premiums and added monthly medical and prescription costs make it harder to maintain good health. For unexpected medical problems, costs could be even higher. If you need coverage now or think you might, now’s the time to sign up before Trump’s plan changes the game again.