Penalties are better than Healthcare Premiums for some

It seems that the rationale for a punishing penalty for not signing up for healthcare has backfired. The high premiums have stopped many people from taking or renewing their health insurance. For the healthy and young people, whose contributions are essential to make the Affordable Care Act or ACA work, it seems that giving money to the Internal Revenue Service can be cheaper than paying hefty premiums to an insurance company with large deductibles.

Misconceptions abound

A few individuals do take part in the program. These are mostly people having lower incomes and who enjoy the maximum number of subsidies. Others, who are poorer, find themselves unable to afford any kind of insurance, even if the schemes are padded with subsidies. For the latter, paying the penalty is a cheaper option.

One of the most unpopular provisions of ACA is the need for people to take insurance. President Obama was understandably cautious about enforcing it. The Internal Revenue Service advertised the decision to proceed sans insurance as permissible option. Federal law will not be violated if premiums are not paid. This law states that every member of the family should have minimum essential coverage to qualify for coverage exemption. The individual must also have a shared responsibility when it coms to filing a return of federal income taxes. Many consumers believe that there is no use for paying such high premiums and opt to pay the penalties instead.

Open season

Data provided by the Internal Revenue Service reveals that from a total of 8.1 million returns, penalties were given by a substantial number of people for being without any kinds of insurance in 2014. This year was the first year and most people were expected to be covered. Preliminary reports showed the average penalty paid was $442 and penalties were imposed on a large number of individuals among a total of 5.6 million returns in 2015.

The health law’s open enrollment season is set to open for the fourth time and consumers are worrying about their available options. The penalty clause was put in with good intentions. When the Affordable Care Act was written by the Congress over two years-2009 and 2010 – the then lawmakers tried to make an effective mix of invite and coercion. Subsidies were created to induce individuals so that they buy insurance. Tax penalties were also imposed to make sure that compliance is a given.

Leave a Comment