What Will Opting Out of the Individual Mandate Look Like?
October 13, 2014
There are 30 million uninsured Americans who will be subject to Obamacare's individual mandate penalty in the upcoming tax season, reports Rachel Bade for Politico, all of which must pay the tax for failing to carry insurance unless they qualify for an exemption. According to the Congressional Budget Office, 23 million uninsured likely qualify for exemptions. The agency estimates that just 4 million Americans will actually pay the Obamacare penalty.
Why do so many people qualify for the exemptions? Because there are a number of them, some of which are vague. Exemptions include:
- Being evicted.
- Being a victim of domestic violence.
- Having one's insurance plan canceled because it did not meet the requirements of Obamacare.
- Being incarcerated.
- Inability to afford the insurance.
- Having medical debt.
- Taking care of one's sick family members.
Notably, the law also includes a blanket "hardship" exemption, which tax filers can use to explain any other reason which may have kept them from purchasing health insurance.
Bade explains that these exemptions will likely get confusing. Some exemptions only cover a portion of the tax filer's time without insurance, requiring individuals to calculate the penalty they should owe based on the portion of uninsured time that does not qualify for exemption. Many exemptions will take a long time to process, and experts say many individuals do not understand how the process will work. While the Centers for Medicare and Medicaid Services has said they expect to receive very few exemption applications after January 2015, tax preparers are skeptical. According to TurboTax, less than 5 percent of individuals eligible for the individual mandate exemption have applied for the exemption so far.
Proving the exemptions is another problem. For individuals seeking an exemption based upon affordability (the law exempts those for whom insurance would have cost 8 percent or more of their income), they must show they could not have afforded the cheapest of plans offered by their employers or the health care marketplace. But Bade notes that employers are not legally required to provide this information, because the employer mandate has yet to kick in, and it is not clear that the exchanges will be able to provide this information either.
Additionally, the Daily Caller is reporting that the Obama administration will not release new premium rates until November 15th, after the midterm elections on November 4th.
Source: Rachel Bade, "A maze to opt out of Obamacare individual mandate," Politico, October 9, 2014.
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