Obamacare is getting closer to full implementation, and many
who oppose the provisions have looked at whether they can simply
ignore its provisions and keep things the way they are. When it
comes to health-care coverage, however, there's a price you'll
pay if you don't comply with the
requirements that Obamacare imposes
In particular, Obamacare encourages insurance coverage in two
different ways. Beginning next year, penalties on individuals
apply to those who don't have insurance. Moreover, employers who
have certain minimum numbers of workers have to provide coverage
for their employees or else face penalties of their own. Let's
take a closer look at those provisions.
President Obama recognizing cancer survivor and Obamacare
supporter Natoma Canfield. Source: White House.
Penalties on individuals
Obamacare's provisions for those who choose to ignore the
individual mandate and not get insurance coverage are fairly
simple. Next year, families who don't have eligible insurance
will pay $95 per adult and $47.50 per child, with the total
amount for each family capped at $285 or 1% of income above the
filing threshold, whichever is greater. In 2015, those figures go
up to $325 per adult and $162.50 per child, with caps of $975 or
2% of income above the filing threshold. The following year,
Obamacare imposes penalties of $695 per adult and $345.50 per
child up to $2,085 or 2.5% of income above the filing threshold.
For any month without coverage, you'll pay a twelfth of the
penalty amount, although you can have up to a three-month gap in
coverage without incurring a penalty.
Where things get tricky, however, is in determining who's
exempt from having to pay the penalty. Low-income families whose
total income falls below the threshold for having to file tax
returns -- which hasn't yet been determined for 2014 but would be
$10,000 for individuals and $20,000 for families if the
provisions applied this year -- don't have to pay a penalty.
Those who make more than those amounts have to calculate how much
they'd have to pay out-of-pocket to obtain health insurance under
the various subsidies available under Obamacare. If their net
cost, after taking away any contributions their employer makes on
their behalf, is more than 8% of their income, then Obamacare
wouldn't impose a penalty.
Moreover, what constitutes "eligible insurance" gets
complicated as well. Insurance has to cover at least 60% of an
average person's medical costs, which may exclude certain
high-deductible health plans. In addition, policies have to cover
certain categories of benefits, including mental health,
maternity care, and hospitalization, among others.
Fines on employers
In addition to the individual mandate, Obamacare also requires
employers who have 50 or more workers to offer insurance to those
who work at least 30 hours a week. In general, employers will
have to pay annual penalties of $2,000 per worker, with
exemptions for the first 30 employees, meaning that companies
with 50 uninsured employees will face fines of $40,000.
Obviously, if employers simply don't offer insurance, it's
easy to figure out their liability. But the penalties can also
apply even if an employer
offer insurance. If the insurance an employer provides is deemed
to be unaffordable to the worker -- defined as costing the worker
more than 9.5% of household income -- then that worker could
receive tax credits to help pay for insurance coverage. That will
trigger a penalty provision of $3,000 per subsidized worker,
although the amount can never be higher than if the employer
didn't offer insurance at all. More complex safe-harbor
provisions may help employers avoid penalties in certain other
situations. For more information, check out this list of
questions and answers on employer responsibilities for Obamacare
at the IRS website.
Play or pay
Figures from the Congressional Budget Office estimate that
roughly 6 million people will choose to pay Obamacare's penalties
rather than obtaining health insurance. That bodes ill for health
, and their peers, all of which have relied on the effectiveness
of the individual mandate to bring in new customers to offset
higher costs that Obamacare imposes on them. Moreover, with
penalty revenue expected to amount to $7 billion by 2016, the
price Americans will pay for not complying with the individual
mandate is far from insignificant in its own right.
Obamacare will undoubtedly have far-reaching effects. The
Motley Fool's new free report, "
Everything You Need to Know About Obamacare
," lets you know how your health insurance, your taxes, and
your portfolio will be impacted.
to read more.
has no position in any stocks mentioned. You can follow him on
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