The guidelines for 2012 begin at \$11,170 for one person and increase by \$3,960 for each additional person in the household. For a family of four, the 2012 guideline is \$23,050. Tax credits for buying health insurance would be available for four-person households with taxable earnings up to 400% of that level, or \$92,200. (The size of a household is determined by how many people are included on the head of household's tax return.)

So to avoid a penalty for not buying insurance, members of a household would have to determine the annual premiums on one of the lowest-quality plans in a state exchange, figure out how large a tax credit their income would entitle them to, and then calculate if the resulting out-of-pocket expense would be more than 8% of their household's modified adjusted gross income. If it was, they would not pay a penalty if they decided not to buy health insurance.

The Kaiser Family Foundation has a Health Reform Subsidy Calculator that helps simplify this complicated calculation.

## The penalties

The actual individual mandate penalties under the Affordable Care Act are perhaps the easiest part of the program to understand:

• In 2014, the annual penalty will be \$95 per adult and \$47.50 per child, up to a family maximum of \$285 or 1% of family income, whichever is greater.
• In 2015, the penalty will be \$325 per adult and \$162.50 per child, up to a family maximum of \$975 or 2% of family income, whichever is greater.
• In 2016, the penalty will be \$695 per adult and \$347.50 per child, up to a family maximum of \$2,085 or 2.5% of family income, whichever is greater.

"Most people think of it as an annual penalty," notes Larry Levitt, a senior vice president at Kaiser. "But it is in fact a monthly thing, and you would pay a penalty for any month that you are uncovered." However, a person may be without coverage for up to three months without triggering the penalty.

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