Penalties loom for those who ignore health reform rules unless they get an exemption


by Robin Erb

Source: Detroit Free Press

To social worker Randy LeBar, the idea of forced insurance is downright unfair.

Under the Affordable Care Act, anyone who goes without insurance faces a penalty on the next year's tax bills - 1% of yearly income or $95 per person, whichever is higher, in 2015. Penalties for uninsured children are $47.50 per child, up to $285 for a family.

Those fees increase steeply every year after that. By 2016, the penalty is 2.5% of income or $695 per person, whichever is higher.

Though LeBar, 34, has insurance for now through his employer, the Trenton man wonders what would happen if he lost his job, had no money and simply wanted to take his chances and go without.

"It's just wrong," he said. "I'd have to pay a penalty for my personal choice?"

The insurance requirement is one of the most controversial provisions of health care reform. The penalty is designed, in part, to nudge reluctant Americans into buying insurance, especially adults 18-34 who may feel they don't need health insurance. These people and their premium payments are needed help pay for those who are older and generally need more medical care.

Without participation from these young adults, exchanges will attract only old and sick people who, in turn, will drive up premium costs and send the marketplaces into a "death spiral," according to a report last month by the conservative Washington-based National Center for Policy Research.

But that's a tough sell to a young adult facing student loans, housing payments, and other bills and who feels healthy, said Devon Herrick, a senior fellow at National Center for Policy Analysis, a conservative Texas-based think tank.

"It's an uphill battle in my opinion," Herrick said. "You're telling someone who already doesn't want to pay for health-care insurance to buy it and pay more for somebody else."

In fact, the National Center for Policy Research concluded that 3.7 million Americans 18-34 who do not have children will be about $500 "better off" per year if they skip insurance and pay the penalty instead.

There's another option, too, for young adults.

Those younger than 30, and some people who can prove that coverage is otherwise unaffordable, can purchase a plan that generally has lower premiums but higher deductibles and co-pays when medical care is needed.

For those people, this plan will satisfy the requirement to carry health insurance. However, federal subsidies that reduce monthly premiums or out-of-pocket costs in other plans can't be applied.

Sal Tolla will be among those doing facing this calculus when policies become available on the Michigan Health Insurance Marketplace on Oct. 1.

The owner of Alpha Auto in Southfield, Tolla, 25, said he's healthy. He has no insurance and doesn't plan to buy it, either.

"I'm going to be supporting somebody?" he said. "Nobody's supporting me."