Health

Millions Would Rather Pay IRS Fine Than Buy Obamacare

| by Oren Peleg

Under the President Barack Obama administration's  Affordable Care Act, anyone remaining uninsured will face a tax penalty of $700 or more. But for millions of people around the country who face the alternative of high insurance premiums, the penalty is a preferred alternative.

“In my experience, the penalty has not been large enough to motivate people to sign up for insurance,” Christine Speidel, a tax lawyer with Vermont Legal Aid, told The New York Times. She added that those who cannot afford to purchase insurance through the exchanges, even with subsidies, "grudgingly take the penalty."

The IRS states that, for 2014, 8.1 million tax returns included penalties for no insurance. Preliminary data for 2015 shows that some 5.6 million returns contained penalties at an average of $442.

“We may roll the dice next year, go without insurance and hope we have no major medical emergencies,” said William Weber, a business consultant in Atlanta who pays $1,400 a month in premiums for his family of four. “The penalty would be less than two months of premiums.”

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“The penalty for violating the individual mandate has not been very effective,” said Joseph J. Thorndike, a director at Tax Analysts, a nonprofit publisher of tax information. “If it were effective, we would have higher enrollment, and the population buying policies in the insurance exchange would be healthier and younger.”

With major insurance providers planning to dramatically increase the rates of premiums in 2017, the cost of insurance is becoming prohibitive to many.

“It is highly unusual for the federal government to use tax penalties to encourage affirmative behavior,” Thorndike later added. “That’s a hard sell.”

Michael Miller, a policy director at Community Catalyst, said, "If you make the penalties tougher, you need to make financial assistance broader and deeper.”

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“The reality is the Affordable Care Act is no longer affordable,” said Gov. Mark Dayton, Minnesota’s Democratic governor, reports The New Yorker.  

According to The New York Times, Kathryn E. Martin, acting assistant secretary of health and human services, is pushing back against these claims.

Martin stated: “If every returning consumer nationwide selected the lowest-cost plan within the same metal level they picked last year, average premiums — taking into account financial assistance — would fall by $28 per month, or 20 percent, compared with 2016.” 

Sources: The New York Times, (2), The New Yorker / Photo credit: Luiza Libardi/Flickr

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