No health insurance? It may cost you

There are penalties for not signing up for health insurance.

People who decide not to sign up for health insurance this year will be faced with a “double whammy.” First of all, there is a base penalty for not signing up. Second, because they’re uninsured, they will have to pay for all of their healthcare costs out of pocket. If they are relatively healthy, going without healthcare coverage may not be an issue. However, if a normally healthy individual comes down with an illness or injury, the cost of treatment may be substantial.

Some individuals who are currently uninsured may be eligible for Medicaid. Effective April 2014 in Michigan, those whose annual household income is under 133 percent of the federal poverty level (about $32,500 for a family of four) will be eligible for Medicaid. If eligible, the fine for not having health insurance does not apply. However, uninsured individuals whose incomes are too high for Medicaid (and who are under age 65, the age range Medicare applies to) will need to purchase health insurance before the March 31, 2014 deadline or pay a fine.

The penalty in 2014 is calculated in one of two ways. The individual will be responsible for paying whichever of the two is higher.

One calculation is based on yearly household income. The fee is one percent of the amount of income above the tax filing threshold. The tax filing threshold is $10,150 for an individual, so the fee is one percent of the amount of income over $10,150.

The other way that penalties are calculated is on a per person basis. With this method, the fee is $95 per person for the year, or $47.50 per child under the age of 18. The maximum amount a family would pay through this method in 2014 is $285.

So, which penalty applies to you? According to healthcare.gov, “a single adult with household income below $19,650 would pay the $95 flat rate. A single adult with household income above $19,650 would pay an amount based on the one percent rate.” That is because the amount of the person’s income over the tax filing threshold ($10,150) is $9,500. One percent of $9,500 is $95. As income rises, so will the penalty. The maximum penalty is the national average of the annual premium for a Bronze level insurance plan in the Health Insurance Marketplace.

The penalty that is assessed for not having health insurance coverage will also increase each year. In 2015 the penalty will be two percent of income, or $325 per person (whichever is higher). In 2016 it will be 2.5 percent of income, or $695. In subsequent years the penalty will be adjusted for inflation.

There are many decisions to be made when it comes to health insurance. Just remember, all decisions have costs!

Michigan State University Extension offers consumer education about making healthcare choices in the Health Insurance Marketplace. Through Smart Choice Health Insurance, participants will determine what they want from health care providers, compare healthcare plans, determine the cost of the plans and will apply what they learn to make the right choice in healthcare plans for them. For more information, visit www.aca.msue.msu.edu.

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