10/22/2012 9:30 PM ET|
How Obamacare penalty will work
Under health care reform, some people without coverage will owe the IRS starting in 2015. Here's a guide to the new rules.
Beginning with their 2014 federal taxes, many consumers who can afford health insurance but decide not to buy it will owe penalties to the Internal Revenue Service when they file their taxes in early 2015. There will likely be repeated efforts to overturn this and other provisions of the Affordable Care Act, also referred to as Obamacare. But the Supreme Court decision to uphold the law's constitutionality this past summer has greatly increased the odds that the so-called individual mandate to have health insurance will be implemented over the next two years.
The nonpartisan Congressional Budget Office has estimated that roughly 4 million people will choose to pay a penalty each year instead of purchasing health insurance. This group is expected to be dominated by younger Americans without children who feel they are healthy enough to forgo insurance. Those penalties will be small in 2014 and 2015 before rising to their full levels in 2016.
Due to expected confusion in the early years of the program, more people may face penalties. But it's unclear what will happen if they don't pay them. The Affordable Care Act forbids the IRS from making aggressive efforts to collect the penalty from people who don't pay. The biggest stick the agency may have is withholding tax refunds from those who owe penalties.
Insurers are required to send out notices of health coverage that will, over time, become as routine as a taxpayer's W-2 statement of taxable wages. The 2014 notices are due to consumers and the IRS by Jan. 30, 2015. But this process may experience its own learning curve, and few people are predicting that a flawless reporting system will be in place right away.
The three major parts of the individual mandate rules are:
- Understanding the nonfinancial grounds on which people are excluded from having to get insurance.
- The income provisions affecting the need to be insured.
- The penalties themselves.
The mandate is designed to apply to people who make enough money to buy private health insurance but choose not to be insured on their employer's plan, in the individual market or through the insurance exchanges that must be set up in each state under the law. The mandate does not apply to Americans age 65 and up who are covered by Medicare.
There is a long list of people who do not have health insurance but will not face a penalty on nonfinancial grounds. They include people who:
- Are between jobs and without insurance for up to three months.
- Have religious objections.
- Are undocumented immigrants.
- Are in jail.
- Are members of an American Indian tribe.
The financial tests to avoid a penalty include having family income that is too low to require filing a federal tax return. Using 2010 rules, this would be less than $9,350 for an individual and $18,700 for a family.
Higher-earning households may also be exempted from the penalties if their out-of-pocket cost for private health insurance is more than 8% of their taxable income. This amount is for any additional cost after subtracting employer health care insurance contributions.
The amount also takes into account any health insurance subsidies available as tax credits through the state insurance exchanges being created by the act. A report from the CBO and the staff of the congressional Joint Committee on Taxation issued in March estimated that consumers who qualify for subsidies using state exchanges will receive an average benefit of $4,780 in 2014, $5,040 in 2015 and $5,210 in 2016. This benefit is mostly for the tax credits but also includes other support items, according to a Treasury Department spokeswoman.
Those credits are keyed to the nation's financial poverty guidelines. These are set each year by the government and adjusted annually based on changes in the Consumer Price Index. The exchanges will offer a sliding scale of insurance subsidies that extend to incomes as high as four times the poverty guidelines.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
Sprocket head, How about this
Our local sheriff got wind that illegals were working in the county.He investigated,and arrested 5 of them.Whan he called immigration they said "let them go" we don't have resources to deal with them unless they have committed a felony. Thats our Goverment
You think the last 4 was bad with empty promises, high gas, more entitlement, feebile foreign policy, etc....oh brutha wait till his next 4.
Where are all of Obama's boiz in this forum? Under the bed, hiding from immigration.
regarding illegal aliens - I'm sure this will go unnoticed like the last rational post ahere about illegals went unnoticed - address the root cuase of the problem - THE COMPANIES THAT HIRE ILLEGAL ALIENS - and the problem will nearly go away.
But no politician worth his bribery money will do that, because the implications to the economy are staggering. Plus, they lose their brivbery money!
We know there are millions of illegal aliens in the country - why are we not hearing DAILY about companies being levied big fines for hiring them?
How about my co-worker who makes as much money as I do, but has decided that she does not need insurance. When she breaks her leg or develops cancer and can not pay for her care are you all going to step in and pay for her since she CHOSE to go without medical insurance. These are the people that are going to be penalized under the new rules and rightly so. Undocumented workers are unable to get medical insurance because they are undocumented and that will not change with the new laws. This change is designed to protect those of us who have made the decision to be
against those who chose not to be.
This administration has the brains of their parties mascots south end.I can't believe people are still buying into his bull%&*#. Whateverer happened to WORK HARD,PLAY BY THE RULES,
and enjoy the fruits of your labor. These policies simply stated are work hard,play by the goverments rules and let anyone enjoy the fruits of YOUR LABOR. I don't particularly like Romney,
However after 4 years of watching this administrations ideals ,backroom deals, and shunning any effort of bi partisanship partnering I can understand why Republicans are the party of no. It should not no but HELL NO!! Romney Ryan 2013 ,Its our only hope that things will change.
What most people fail to realize is that with this SCOTUS confirmation, Congress can get a wild hair about non-particpation in commerse for almost anything (such as buying a new car every three years) and if you don't buy a new car every three years, they can create a "tax" that you have to pay because you decided to save money for your retirement.
Well Mr. Obama keep saying that the job market is getting better and yet no places are hiring and the only people that are getting hired are those who are undocemented aleins that are willing to work for nothing. So how are people like my self with out a job or money be able to afford getting heath insurence. What happen's to the people who dont have the money to pay for insurence or the fine's Jail time? This is the biggest peice of **** that has been shoved down the throat's of the american people. Well on the status of the Illeagl alein's if the goverment know's that there undocemented and illeagle why are the not being deported for? As far as those people that are in lockup the taxpayers are already getting screwed over there seeing how they got better heath care than what most american's will ever have.
GIVE ME LIBERTY OR GIVE ME DEATH
The government is not to tell us what to do or say in any way. What ever happened to liberty. This is not free country if the government can tell me what to buy. That I'm sure is not the nation our founding fathers wanted. Please. If I have to pay a Thousand dollars a month I am going to give it to my doctor and cut out the insurance company. If we all do that I bet health care will be affordable again. What do you think?
"the poor can't afford health insurance" is the biggest lie ever. the truth is most poor waste the money the have. it a matter of priorities .they spend too much on discretionary spending before paying for necessities.
the poor are poor because they are ignorant . they need to be forced to do the right thing
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.