By Joseph M. Morgan
joseph@southerntorch.com
Citizens of Alabama who elect not to enroll in a health insurance plan in 2015/2016 will face increased fines. These fines are meant to incentivize individuals without insurance to obtain it through the federal marketplace. This “individual shared responsibility payment” was established by the Affordable Care Act (ACA), more commonly referred to as Obamacare. The ACA was passed in 2010 amid much controversy. The fees were also intended to offset the costs incurred on those insured through monthly premiums by the unpaid medical expenses of those uninsured. Alabama is one of 37 states that opted out of establishing a state run marketplace and must rely on the federally established market. Americans nationwide are facing an increase of monthly premiums of an average of 7.5%, according to CNN Money.
The fines apply to any month an individual chooses not to buy health insurance. They are calculated through two different methods, being either by percentage of household income or per person in your household not covered under a plan, with the individual paying whichever is highest. The new rates are 2.5% of total household income or the max total yearly premium of a Bronze plan sold through the marketplace under the percentage method, while per person increases to $625 for an adult and $347.50 per child under 18 with a maximum amount of $2085, according to healthcare.gov. This translates roughly to a 25% increase in fines on yearly household income from 2015. Per person fines reflect steeper increases of 48% per adult, 54% per child, and an increase of 54% in the maximum amount.
Conversely, if residents obtain insurance through the federal marketplace, they will receive a tax credit to offset the costs of the monthly premiums. While the creators of the ACA intended this to be an adequate offset, consumers will not benefit from this until taxes are filed. The best way to avoid the fines is to buy insurance during the ACA open enrollment period from November 1 until January 31, but many exemptions exist. The government run website, healthcare.gov, maintains a tool to navigate the complex system of exemptions to see if an individual might qualify. For example, taxpayers may be found exempt if the cost of the Bronze plan (lowest level) is more than 8.05% of your household income. Individuals are also exempt if their regular health insurance plan was cancelled due to Obamacare. The downside of some exemptions is that taxpayers will not be able to accurately determine if they qualify until taxes are filed in April 2016.
