mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Weighing the ACA
Why Americans Choose ACA Penalty Over Insurance

Even with an extended sign-up period and the threat of a penalty, many Americans are passing on insurance. Obamacare originally required citizens to purchase insurance by February 15, 2015, or pay a penalty this tax season for non-coverage. But last month the administration created a special enrollment period that gave the uninsured until April 15th to purchase insurance. The WSJ reports, however, that this extra time might not make that much difference:

Only 12% of uninsured people would buy policies if informed of the penalty, according to a survey of 3,000 adults polled through Feb. 24 by McKinsey & Co.’s Center for U.S. Health System Reform.

At H&R Block Inc., “our analysis indicates that a significant percentage of taxpayers whose household members were not covered for at least a portion of 2014 are opting” to pay the penalty, said Mark Ciaramitaro, a vice president of health-care enrollment services at the tax-preparation firm.

Who are these uninsured people opting for the penalty? It’s an important question. On the one hand, they might too sick or poor to afford insurance. Many of these people are exempted from the penalty if they live in states that did not expand Medicaid, but not all. Because they use lots of uncompensated care, these people, ACA advocates claimed, are a drag on the medical system as long as they remain uninsured. So if they’re opting for the penalty instead of insurance, that could be bad news for the system as a whole. On the other hand, these could be people who are healthy and feel like they don’t need insurance—in which case their decision to stay out of the insurance pools could make premiums more expensive.

Either way, it’s not great news for the administration, and it doesn’t help that the ACA forbids the IRS from applying fines or liens to those who don’t even pay the penalty. Generous estimates of the law peg the number of people it has insured at around 16 million—though that number doesn’t capture how many previously uninsured Americans got insurance through the ACA specifically. But all that aside, if the remaining uninsured are opting for the penalty over insurance, it’s unlikely to climb much higher.

Features Icon
show comments
  • Frank Natoli

    I beg forgiveness for a slight digression, but I recently discovered that my AmeriHealthNJ plan, that I was forced into when my 2014 ACA compliant policy was cancelled by AmeriHealthNJ, that I was forced into when my 2013 ACA non-compliant PPO policy was cancelled by United Healthcare Oxford although the law allowed them to grandfather it, has no co-pays for routine office visits until the annual deductible of $1,800 is exhausted, i.e., I have no insurance coverage until the deductible is exhausted. I am not allowed to change anything until 2016, all thanks to ACA. I can change my auto insurance coverage and/or company. I can change my life insurance. I can change my home insurance. I can change my disability insurance. But I can’t change ANYTHING with my health insurance until 2016 THANKS TO DEMOCRAT VOTERS. THANKS!

    • Andrew Allison

      Forgive them, they know not what they do. It’s the people they sheepily elected who handed the insurance and healthcare industries the keys to the taxpayer safe and screwed people like yourself. BTW, the new open enrollment period for the fictional few who didn’t know about the individual mandate provides you with the opportunity to change your coverage should you wish to do so (and you can cancel your coverage any time). The Byzantine POS known as ACA provides endless opportunities for the alert to take advantage of it while sticking it to the unthinking.

  • Andrew Allison

    The IRS can only collect the penalty (and, apparently, over-paid subsidies) from from a tax refund; one more reason not to make interest-free loans to the government via over-withholding. Had the individual cited in the reference put the windfall he received into an HSA he would not only have received his full refund but paid for $2,340 of his care with pre-tax dollars (HSA premiums are deductible from MAGI). The benefits are even greater for couples and families, since both partners can have HSAs, thereby reducing MAGI by up to $8,700 and/or a single HSA can be used to pay expenses for both partners and any children. Shop carefully — HSAs offered by health insurance companies are a rip-off (Anthem, for example, charges and additional $4/mo, their HSA provider does the same and pays a tenth the interest of the best independent provider (Connexus).

  • ljgude

    Hi Andrew, nice to see you pick apart the entrails of the beast. I’m watching this train wreck from a distance in Australia and have just spent several happy hours figuring out that I don’t have to pay any Obamacare tax because I didn’t spend any time in the US in 2014. All I had to do was put the letter ‘C’ in a box in column 3 of form 8965. I noticed that I had to be really ‘alert’, as you put it, or they would have been happy for me to pay the penalty. They explicitly say you get an exemption if you are dirt poor but leave the other exemptions decidedly more low key. The reference in the article to people who use ‘uncompensated care’ are apparently the same very poor people who have been getting care, being billed, but have no money to pay. End result, the hospitals bill the government for what they think they can get away with. I’ve been thinking if I were such a person why would I want an insurance policy that pays only part of a bill rather than continue with business as usual. Why bother? The hospital charges me $10,000 for the aspirin tablet, the insurance picks up the first 50 cents, and government gets lumbered with the rest.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service