Open enrollment for insurance plans under the Affordable Care Act begins on Nov. 15. Between then and Feb. 15, you’ll be able to enroll in a new health care plan, re-enroll in the one you picked for 2014, switch plans, and apply for subsidies, depending on your income.
Crucially, as HealthCare.gov points out, “If you don’t enroll in a health plan by Feb.15, 2015, the only way you can get health insurance for 2015 through the Marketplace is if you qualify for a Special Enrollment Period.” And unless you have other health coverage, enrolling in Obamacare is the only way you can avoid having to pay the government’s fee for failing to secure health care coverage.
Hold Up a Sec — What Was That About a Fee?
To ensure that insurers have enough healthy persons in the system, paying premiums and offsetting the cost of taking care of those who get sick, Obamacare requires that everyone either sign up for health insurance — or pay a fee (sometimes referred to as a “tax” or even a “penalty”) to opt out.
And the fee the government requires you to pay in 2015 for not signing up for insurance may be double or even triple what it was in 2014 during the slow ramp-up of the Affordable Care Act.
There’s a long list of exceptions. For example, if you meet the government’s definition of being too poor to afford even Obamacare — no penalty. If you’re an American Indian — no penalty. Or if you’re in jail — no penalty. (This is what we call a “mixed blessing.”)
Crunching the Numbers
Those exceptions aside, in 2014, the first year in which fees were charged for opting out of Obamacare, opt-outers were required to pay either $95 per person or 1 percent of their income above a certain threshold. Whichever number worked out to be greater was the one you paid for forgoing health care insurance. In 2015, these fees jump to the greater of either $325 or 2 percent of income over the filing threshold.
And that’s just if you’re single. If you have a family to provide for — and insure — then forgoing Obamacare could cost you as much as $975 (or 2 percent of income over the threshold). And in 2016, the numbers will jump again. Individuals will pay $695 (or 2.5 percent of income) for opting out of health insurance coverage. Families will pay up to $2,085 or 2.5 percent.
Result: If you didn’t pay attention to the Obamacare debate last year, this year it’s more important than ever to study the math on whether you can afford to opt out.
Unfortunately, the numbers can quickly get tricky. For example, you probably noticed mentions of a “threshold” above, right? Well, there’s not just one threshold, but 10 that could apply to you, depending on your filing status and age. So your penalty can vary based on whether you are a single tax filer, a married couple filing jointly, a married couple filing separately, etc.
The Internet to the Rescue!
Fortunately, the good folks at insuranceQuotes.com, a subsidiary of Bankrate (RATE), have an online calculator that will help you do the math based on your replies to three short questions: •How many adults are in your household?
•How many children are in your household?
•What is your estimated annual household income?
The Obamacare Penalty Calculator will quickly estimate what your penalty should have been in 2014, and what it will probably rise to in 2015.
A Few Examples, Please?
Our pleasure. The calculator’s pretty simple, so we won’t spend a lot of time on this, but just to satisfy your interest, here are a couple examples:
A single taxpayer earning an adjusted gross income of $33,422 a year — which, according to the Internal Revenue Service, was the average earned by single filers in 2012 (the latest year for which the IRS has complete data) — would have paid a penalty of $232.72 in 2014, rising to $462.44 in 2015 for refusing to buy insurance.
The IRS estimates average adjusted gross incomes at $110,769 for married couples filing jointly. Such a couple, at such an income — regardless of whether this couple has no children, one child or several children — would have owed a family penalty of $904.69 for forgoing health insurance in 2014, rising to $1,803.38 in 2015.
These are, of course, just examples. As Leo Tolstoy once wrote: “Every unhappy family is unhappy in its own way.” To find out how unhappy you will be if you miss the deadline for signing up for health insurance, check out insuranceQuote’s Obamacare penalty calculator.
Motley Fool contributor Rich Smith doesn’t have Obamacare (yet), and he has no position in any stocks mentioned above, either (also yet). The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.