Millions will not have to pay Obamacare tax penalties, report says

by Karen Pallarito, Healthday Reporter
Millions will not have to pay obamacare tax penalties: report
More uninsured will qualify for exemptions in 2016 than earlier estimates showed, experts say.

(HealthDay)—Just a fraction of Americans will pay federal tax penalties in 2016 for not having health insurance, new projections show.

Although an estimated 30 million people will still be uninsured in 2016, only 4 million are expected to pay penalties, according to the latest report from the nonpartisan Congressional Budget Office (CBO).

That's 2 million fewer people than CBO projected in September 2012.

The revised estimates reflect an increase in the number of Americans who experts believe will qualify for exemptions from federal tax penalties under the Affordable Care Act, which is often called "Obamacare."

Starting this year, the health reform law requires most legal U.S. residents to have health insurance. Those that don't have coverage could face federal penalties when they settle up with Uncle Sam on their tax returns next year.

In 2012, the U.S. Supreme Court upheld the health reform law's so-called individual mandate requiring most Americans to carry or pay penalties.

The penalties come in two forms: a flat amount or a percentage of adjusted gross income per household—whichever is greater. Penalties start at $95 per adult in 2014, rising to $695 per adult in 2016 (half of that for uninsured kids), or 1 percent of household income in 2014, up to 2.5 percent in 2016.

But there are plenty of exceptions to the rule, a few of which were spelled out in regulations issued after the CBO's initial projections.

"For consumers that have made good-faith efforts to obtain coverage but because their state hasn't expanded Medicaid or they've been unable to find affordable alternative coverage, making sure that they get an exemption from the mandate is a fair thing to do," said Sabrina Corlette, senior research fellow and project director at Georgetown University's Health Policy Institute in Washington, D.C.

People can get a bye from the penalties for many reasons, such as not earning enough to file a return or being locked out of Medicaid because their state has not expanded eligibility under the Affordable Care Act.

Americans may also apply for a "hardship exemption" if certain life circumstances, including a bankruptcy, prevent them from obtaining coverage.

"Particularly in this first transitional year, I think being liberal toward the granting of exemption is the right call," Corlette said.

With fewer people paying penalties, the CBO expects the federal government to take in $3 billion less than anticipated. An estimated $4 billion will be collected in 2016 and $5 billion a year from 2017 through 2024.

"That has no effect on the implementation of the law whatever," said Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities in Washington, D.C., and a former head of the CBO division responsible for such cost estimates.

To the extent that consumers are able to benefit from the exemptions, "then that's presumably a good thing for them," he said.

More information: Go to HealthCare.gov to learn more about exemptions from the Affordable Care Act tax penalty.

Related Stories

Options set for those lacking new health coverage

date Dec 20, 2013

People whose existing health care insurance has been canceled because of the Affordable Care Act will not be hit with tax penalties for failing to line up new coverage as required under the law.

Recommended for you

New measures identified for newborn care in Uganda

date 6 minutes ago

In Uganda, child mortality rates are improving, but progress is slower for deaths occurring in the first four weeks of life, or the newborn period, and for stillbirths. But recent evidence from local researchers ...

Should men cut back on their soy intake?

date 2 hours ago

Recently, a friend called my husband to inquire about the risks for men in consuming too much soy milk. He had read an article that described how one individual's plight led him down the path of breast enlargement, and was ...

Probing Question: What is umami?

date 3 hours ago

The next time you're at a dinner party and want to spice up the conversation, you might compliment the hosts on their umami-rich appetizers. Then wait a moment until someone invariably asks, "What's umami?"

Will the Affordable Care Act eliminate health disparities?

date 4 hours ago

Massachusetts' health reform may be a crystal ball for researchers and policymakers in forecasting the potential impact of the Affordable Care Act. Many see the ACA as the backbone of efforts toward closing the nation's health ...

Experts question election pledges on GP access

date 15 hours ago

As the general election in the UK approaches, experts writing in The BMJ this week question whether the party promises on access to general practice are likely to be achievable.

User comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.