Americans prefer paying Internal Revenue Service (IRS) penalties than insurance, says a report. People see these penalties as more affordable than monthly health insurance premiums and deductibles.
Individuals who do not obtain health insurance coverage are subject to tax penalty unless they qualify for one of about 30 exemptions. Those who went uninsured the previous year or have not enrolled in time for 2016 would need to pay fines and penalties under the Affordable Care Act.
The Cost Of Going Uninsured
There are two ways in which the fee for not having health insurance is calculated. One is per person, and the other is as a percentage of the household income. In 2015 the fee was $325 per adult or 2 percent of the household income. For 2016 and beyond, the penalty will be $695 per adult and $347.50 for each child under 18, or 2.5 percent of the household income. Uninsured individuals will have to pay whichever is higher.
In 2015, the average penalty for uninsured households penalty is $661 but in 2016, it is expected to increase to as much as $969. Those who are qualified for premium subsidies face an average household penalty of $738, while for those who are uninsured and not eligible for any financial assistance, their average household penalty may total $1,450.
For people who do not have diseases and those who are healthy, paying the penalty of going uninsured is more preferable over shelling out for insurance premiums.
Clint Murphy, 45 years old and an engineer in Sulphur Springs, Texas, would rather pay the penalty than spend more on insurance coverage. He became uninsured in April after quitting his job that has health benefits.
He shrugged off the fact that the deadline for getting health insurance for 2016 had passed.
"The fine is still going to be cheaper," Murphy said.
According to his estimates, since he was uninsured the previous year and was not able to enroll in 2016, he needs to pay a penalty of $1,800. An insurance coverage costs $2,900 or more, so by choosing to pay the penalty rather than insurance, he could save up to $1,100. He said that all he needs to do is stay healthy.
Cash vs. Monthly Premiums
Health insurance that may cost more than $10,000 a year may let people think that paying for medical services out of their own pockets is cheaper, and this is why many would rather pay for appointments with doctors, laboratory tests and prescription drugs only when the need arises.
Michigan resident Susan Reardon is thinking of going uninsured in 2016. The 61-year-old calculated that for coverage, she would have to spend more than $12,000 which includes $500 worth of premiums per month and an estimated $6,850 deductible - and that's the cheapest option if she would like to have anything more than preventive benefits.
"I feel like it's better just to die," Reardon added if something bad happens to her. She said she's better off paying for medicine or doctors' appointments when needed than paying so much for insurance coverage.
Tim Fescoe and his wife went uninsured in 2015 uninsured because of the expensive insurance coverage plans they were given.
"It would work better if everyone signed up. But you're asking a bunch of people to basically just give money into the system when they have an option not to," he said.
Fescoe added that it he was happier paying for doctors and drugs out of his pocket than dealing with an insurance company and paying expensive dues.
Penalties Are Cheaper Than The Cheapest Insurance
According to a recent analysis by the Kaiser Family Foundation, around 7.1 million people who are qualified to enroll in marketplace coverage with or without subsidy would pay less in penalties than even for the cheapest health coverage available to them.
That may be true, but there's a downside to going uninsured, according to the Department of Health and Human Services.
"We understand some people may be thinking through their choice of coverage, but going without health insurance is a serious gamble that can be catastrophic if wrong," said Ben Wakana, a spokesperson for the health department. He added that people would still benefit from having insurance more than having nothing at all.
In 2014, after the law was implemented, around 7.5 million people in the United States paid a penalty for being uninsured, while about 12 million received exemptions because of their financial situation, and their penalties were waived.
Photo: Sharon Sinclair | Flickr