With less than two weeks of open enrollment left, Covered California is reminding consumers that they will face increased penalties for not having health insurance this year.
Since Obamacare's individual coverage requirement took effect in 2014, the federal government has imposed increasingly expensive fines to people who do not purchase coverage through health exchanges or obtain insurance through an employer or a government program such as Medicare. This year brings the highest penalty yet, Peter Lee, Covered California's executive director, said during a recent news conference.
"This is real money going straight to the IRS, where the consumer gets nothing in return," Lee said.
This year, the penalty is $695 per adult and $347 per child up to a family cap of $2,500 or 2.5% of household income, whichever is greater. Last year's penalty was $325 for adults, with a $975 maximum or 2% of household income.
People in lower income brackets can qualify for significant government subsidies that help pay monthly premiums, and many in those categories also qualify for health plans with lower out-of-pocket costs.
A recent study from the Kaiser Family Foundation estimated that of the nation's 7 million people who qualify for a subsidy, about half have incomes low enough to qualify them for a zero-cost bronze plan, which must cover at least 60% of the enrollee's healthcare costs.
The more income a household makes, the less of a subsidy — if any — it can receive, requiring many to weigh the expense of a penalty for being uninsured against the cost of monthly premiums.
Kaiser predicts that in 2016, penalties will increase, on average, from $1,177 to $1,450.
According to the Internal Revenue Service, 7.5 million Americans paid a total of $1.5 billion in Obamacare penalties on their 2015 tax returns for failing to obtain insurance in 2014. That year, the fines assessed were only $95 per adult or 1% of household income, whichever was greater.
So a major question as the Affordable Care Act's third open enrollment deadline approaches on Jan. 31 is whether higher penalties will motivate more uninsured Californians, and those like them across the country, to sign up.
Cynthia Cox, associate director of health reform and private insurance for Kaiser, said it is difficult to know whether the penalties are motivating potential enrollees. Penalties are assessed on a family's tax return the year after they were incurred.
"It could really be 2018 until you start seeing a real surge in enrollment because of the penalties," Cox said.
Naama Pozniak, a broker in Los Angeles who said she runs a storefront that serves the University City, Valley Village and North Hollywood neighborhoods, said she has seen a fair amount of willingness among the unsubsidized to sign up, with most of those applicants choosing the lowest-level bronze plans with annual deductibles of about $6,000. She said Obamacare's requirement that all preventive services be covered with no deductible has often been the deciding factor.
"Mainly I'd say that most people, because of the preventive services, are feeling that they do get something out of it even if it has a high deductible," Pozniak said.
As Obamacare's latest open enrollment period enters its final days, Covered California officials are pushing hard on the message that paying a penalty rather than premiums will deliver no protection from life's unexpected medical emergencies.
"The bigger penalty could be showing up in the emergency room and walking out with a bill in the tens of thousands of dollars," Lee said.
Sisson writes for the San Diego Union-Tribune.