Casey, a 30-year-old from New Jersey, decided to pay a tax penalty instead of paying for her health insurance. Why?
“I started with Obamacare, then quickly realized it wasn't worth it because of the $3,000 deductible,” she says. “I couldn't afford the monthly price of the plans with better coverage.”
People like Casey are in a quandary. If they don't pay for insurance under the Affordable Care Act, they face a tax penalty. Yet the insurance that is offered on the open exchange often requires them to meet a high deductible before any benefits will be paid out.
Caught between a rock and a hard place, they risk it.
This means they don't take out health insurance. Instead, they shoulder out-of-pocket health care costs, and hope nothing catastrophic happens to them or their loved ones. Oh, and they pay a tax penalty for being uninsured.
It's a roll of the dice, as accidents and health crises can occur at any age. We know health insurance premiums rising in most states, making Casey's situation commonplace. In 2017, monthly premiums will increase by 22 percent on average. Some increases will be as high as 191 percent in counties of Arizona. Meanwhile, premiums are decreasing 30 percent in some parts of Texas.
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The instability and rising costs of health insurance is forcing more people to self-insure by way of their emergency fund — if they have one.
“I canceled my plan, and ended up having not only to pay the penalty, but I also owed the government for a need-based subsidy I qualified for through the health insurance marketplace for the months I was insured,” she recalls. It was a nightmare.
“My entire tax return was gone and I owed several hundred dollars to boot, plus a couple hundred in medical bills for the doctor’s visits my insurance denied while I was insured since my deductible hadn't been met!”
Casey says she plans to avoid high-injury-risk situations as much as possible. She also tries to keep her immune system healthy with vitamins.
“I'm a teacher in grades K–2, so I get colds all the time, but I can't go to the doctor.”
She also says that it’s degrading to depend on organizations that offer free or reduced-cost medical care even though she’s a working adult.
“I'm 30 years old back at Planned Parenthood for birth control like when I was a teenager and didn't want my parents to know. The [Obamacare] system did not work in my favor!” she says.
The costs for getting out of Obamacare can vary, depending on your situation.
Like Casey, you could end up owing the subsidy you were granted. Plus, if you elect to decline or cancel your health insurance, you will be responsible for paying a tax penalty. This is called the “individual shared responsibility payment.” This penalty is theoretically meant to help make up for how much you are ‘costing' the government by not paying for health insurance.
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For 2016, the penalty is either $695 per adult (and $347.50 per child) or 2.5 percent of your household income – whichever amount is greater. The penalty is also pro-rated per month if you lack health insurance coverage for less than a full year.
The 2017 fees are not yet published, but they are expected to increase. This penalty will be taken out of your tax return. You’ll still be responsible for paying out-of-pocket for your medical expenses since you don’t have insurance. Essentially, you're paying a fee for the “privilege” of not paying for health insurance.
No one questions that our healthcare system is flawed. CentSai takes a look at how people are approaching health insurance. For the next article in our series, click here.