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How Much is the Obamacare Penalty?

This article was written by in Health. 3 comments.


The Affordable Care Act requires most American citizens to have health insurance or health care starting in 2014. Many of those required to have health insurance will owe additional tax if they are not enrolled in a plan. It’s no surprise that many citizens are not happy about being told by the government that they have to spend money. And whenever the government requires something of its citizens, it doesn’t sit well with many of those who don’t agree with what is being required.

When the government drafted young citizens into the armed forces during times of war, protests intensified with each action until the draft was eliminated, and some enterprising individuals did whatever they could to avoid military service, including fleeing to another country. National defense and national health may be good reasons to encourage citizens to take actions that would be for the benefit of society, but Americans’ individualistic nature prevents everyone from gladly jumping on board the train.

Take up thy stethoscope and walkThis time around, those who don’t want to accept the government’s requirements can avoid jail. The penalty for not buying a health care plan from a private company is to pay a fee. Compare this with other civilized companies that have a national health system, where everyone is covered for basic health care through a public, government-operated organization, and it’s just a service provided by the government and financially supported by citizens like infrastructure maintenance and national defense. The fee varies, and some households can avoid the fee entirely.

According to the Tax Policy Center, these groups are not subject to the health insurance requirement and can avoid the fee entirely:

  • Individuals with income below the income tax filing threshold. If you don’t have to file your tax return, you don’t have to pay a fee.
  • Individuals for whom the cost of getting health insurance (net of ACA subsidies) would exceed 8% of household income in 2014. That percentage would rise in subsequent years if premium growth exceeds income growth.
  • Individuals in states that did not accept the ACA’s Medicaid expansion who would have qualified for Medicaid under the expansion. These states did not accept the expansion: Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.
  • Members of Indian tribes.
  • Members of certain religious faiths.
  • Members of a health care sharing ministry.
  • Individuals not legally in the U.S. (undocumented aliens).
  • Incarcerated individuals.

For all other individuals, in general, the penalty for not having health insurance is 1 percent of household income after discussions with a maximum of $95 per adult and $47.50 per child. The penalty is capped at the average cost of a bronze level health plan for the same family, so in some cases — large families, most likely — it could be cheaper to buy health insurance than to pay the penalty.

Using the penalty calculator I ran some simulations. For a large family with a household income of $750,000 — this is a wealthy family — it’s probably cheaper to buy a bronze health insurance plan by 2016 as the fees increase. For a large family with a household income of $45,000, for whom the average price of a bronze plan would be $16,700 (or more than one-third of total income), the penalty of $285 for 2014 seems much more affordable. But the average health care plan price doesn’t take into account subsidies that are available for families that couldn’t otherwise afford private health care. Health care purchased from a private company through the national or state exchange can still amount to less than the fee if the situation calls for that much assistance.

My COBRA health insurance coverage ended in January, and I spent some time last year shopping for health insurance using the national exchange. Despite lots of initial difficulty, my application did go through, and I was able to sign up with health insurance from AmeriHealth. At the same time, however, I discovered that I was eligible for state continuation of COBRA through California’s program, Cal-COBRA.

Because I liked the plan I had under COBRA, I stayed with Cigna, stayed with my doctor, and paid a little more under Cal-COBRA rather than accepting the plan with AmeriHealth. The best AmeriHealth plan would have left me with fewer benefits than the plan with Cigna, but would have saved me money on monthly premiums. And because I can afford individual health insurance, the health exchange and the options presented aren’t really designed for me.

How do you feel about the Affordable Care Act penalty? Would you rather pay the penalty than be forced to buy health insurance? Do you see preventive healthcare as an important piece of a civilized society, or is health insurance primarily an individual issue?

If you want to calculate your health insurance penalty over the next few years, use this calculator.

Photo: Flickr

Updated March 13, 2014 and originally published March 10, 2014. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 3 comments… read them below or add one }

avatar Yana

We will pay the penalty if we do not get an exemption. Our circumstances qualify us in a few ways as far as a hardship exemption, which I did apply for. Apparently, however, the system needs something more than I provided, as I got voicemail messages to that effect. They were not specific, but the agent said if they could not contact me by phone, they would send the paperwork in the mail. That is what I prefer. I don’t care to be bothered on the phone. We will not purchase health insurance regardless, and we will pay the penalty even though some say it is not enforceable. I consider it a requirement.

Health insurance is not health care, and having it does not remove complete responsibility for payment from the insured. The insured has no power or choice in what is covered or what is paid for by insurance. The only thing assured is that the for-profit business rakes in its welfare check. We will not subsidize that, nor will we take a “subsidy” that benefits the insurance middleman. It would be interesting if you researched something – I am under the impression that those who get exemptions become eligible for a subsidy that completely covers the health insurance premium. That’s why I consider the health insurance companies to be guaranteed welfare recipients.

I believe in universal health care, no means-testing, and real health care reform that regulates prices. Part of the return that taxpayers should receive for their dollars is full choice and access to health/dental/vision at no additional cost and without threat or disincentive to achieve a high level of financial success.

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avatar jim

No, you do not get free insurance if you’re exempt. Where did you get that idea??
Exemption just means you don’t have to pay the penalty.

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avatar Yana

I got the idea awhile back when playing around at https://www.healthsherpa.com/ . I went as far as contacting an agent to get more information on some of the plans, and on exemptions. The point was that getting an exemption opened the door to more options, one of them being 100% subsidy. Can’t remember if it was income-based, as I was just researching with no intention of buying health insurance. Western Health was the insurance company I contacted via email.

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