How to Avoid the Steep Penalties Imposed by Obamacare

There has been a lot of talk about Obamacare in the media as of late. While much of it has been positive, a relatively equal amount has been negative. Whatever your thoughts on the matter, there is little denying that not much will change before it becomes effective on January 1, 2014.

Because it is such an important topic, we thought that we’d take a look at it here on Project Debt Relief.

Obamacare, in its most simple sense, requires all eligible individuals to have health insurance by January 1, 2014 of this year. These individuals include adults, the elderly, and children.

Those that fail to find insurance face a steep penalty in the form of a fine. The fines will be $95 for an adult and $47.50 for a child. Furthermore, you can face additional penalties if you yourself have individual coverage but any of your children that are dependents aren’t insured.

The steep penalties imposed by Obamacare are particularly troublesome because nobody knows how many Americans will be without the proper health insurance after January 2014. The Congressional Budget Office estimates that around 30 million Americans won’t have health insurance by 2016. This means that a lot of people could be facing fines, as many as 6 million, in fact.

Growth of the Penalties

The already steep penalties for not being properly insured will continue to grow each year. These are the estimated fines for the next couple of years:

  • 2014: $95 for an adult or 1% of household income
  • 2015: $325 for an adult or 2% of household income
  • 2016: $695 for an adult or 2.5% of household income

It’s important to keep it in mind that children’s fines are half that of adults.

Simply put, if you don’t have health insurance from 2014 on, you’re going to be paying a hefty amount of money as far as fines go.

Avoiding the Penalties

Naturally, the easiest, or rather only, way to avoid the steep penalties imposed by Obamacare is by having your own health insurance. You need to be insured so that you meet the law’s minimum standards for health coverage.

These minimum standards for coverage are also known as the “minimum essential coverage.” Every employer that offers health benefits and every insurance provider are required to offer these minimums.

There are a few snags to this minimal essential coverage though. You don’t meet the requisite requirements if the policy that you have only offers you limited benefits. For example, only having a dental insurance policy won’t cut it. It doesn’t qualify as minimum essential health insurance coverage.

Exemptions

There are quite a few exemptions to the new health insurance rules imposed by Obamacare. First of all, the government had to take into account all of the different employment, marital, dependent status, and family situations that might affect a person’s coverage, especially because many of these can change throughout a year.

Simply put, not all people fit into a cookie-cutter pattern. People’s lives are messy and different, especially regarding income and family income.

Because of this, The Affordable Care Act has included nine categories of people that are not required to have health insurance by 2014. These people will not be fined if they do not have it.

The bulk of these ‘exemptions’ are for low-income Americans. These are people who cannot find affordable health insurance coverage. Generally, you fit into this category if you don’t make enough money to file a federal tax return.

A few of the other exemptions from the new law include:

  • Religions that oppose insurance benefits
  • Federally recognized Indian tribes
  • Non U.S. Citizens lawfully living in the U.S.
  • Inmates

How Penalties Are Collected

There is no saying how strict or aggressive the government will be at collecting health insurance penalties in the coming year.

Right now, it seems as though the emphasis won’t be on enforcing penalties. Instead, it seems like the government will focus on convincing people, especially those that are young and healthy, to get insurance.

However, in instances where enforcement will occur, the Internal Revenue Service will be in charge. They will collect penalties (for 2014) via adjustments on people’s 2014 tax returns.

Even though the IRS can penalize those that don’t have health insurance through the balance of taxes due, they cannot lawfully go after tax payers that do not pay their penalties.

Conclusion

So how do you avoid the steep penalties imposed by Obamacare? The simple answer is not to mess with them and to make sure that you are insured with the proper minimum insurance coverage (unless you are an exempt individual). No one knows how strict enforcement will be if you don’t but the fines are steep enough already that most people will not want to mess with them.

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