Lack of health insurance will cost more

WASHINGTON – Being uninsured in America will cost you more in 2015.

It’s the first year all taxpayers have to report to the Internal Revenue Service whether they had health insurance for the previous year, as required under the Affordable Care Act. Those who were uninsured face fines, unless they qualify for one of about 30 exemptions, most of which involve financial hardships.

Dayna Dayson, of Phoenix, estimates that she’ll have to pay the taxman $290 when she files her federal return. Dayson, who’s in her early 30s, works in marketing and doesn’t have a lot left over each month after housing, transportation and other fixed costs. She’d like health insurance but couldn’t afford it in 2014, as required by the law.

“It’s touted as this amazing thing, but right now, for me, it doesn’t fit into my budget,” she said.

Ryan Moon, of Des Moines, Iowa, graduated from college in 2013 with a bachelor’s in political science and is still hunting for a permanent job with benefits. He expects to pay a fine of $95. A supporter of the health care law, he feels conflicted about its insurance mandate and fines.

“I hate the idea that you have to pay a penalty, but at the same time, it helps other people,” said Moon, who’s in his early 20s. “It really helps society, but society has to be forced to help society.”

Going without health insurance has always involved financial risks. You could have an accident and end up with thousands of dollars in medical bills. Now, you may also get fined. In a decision that allowed the health care law to advance, the Supreme Court ruled in 2012 that the coverage requirement and its accompanying fines were a constitutionally valid exercise of Congress’ authority to tax.

In 2015, all taxpayers have to report to the IRS on their health insurance status the previous year. Most will check a box. It’s also when the IRS starts collecting fines from some uninsured people, and deciding if others qualify for exemptions.

What many people don’t realize is that the penalties go up significantly in 2015. Only 3 percent of uninsured people know what the fine for 2015 will be, according to a recent poll by the nonpartisan Kaiser Family Foundation.

Figuring out your potential exposure if you’re uninsured isn’t simple.

For 2014, the fine is the greater of $95 per person or 1 percent of household income above the threshold for filing taxes. It will jump in 2015 to the greater of 2 percent of income or $325. By 2016, the average fine will be about $1,100, based on government figures.

People can get a sense of the potential hit by going online and using the Tax Policy Center’s Affordable Care Act penalty calculator.

Many taxpayers may be able to get a pass. Based on congressional analysis, tax preparation giant H&R Block says roughly 4 million uninsured people will pay penalties and 26 million will qualify for exemptions from the list of more than 30 waivers.

But it’s unclear whether taxpayers are aware of the exemptions.

Deciding what kind of waiver to seek could be crucial. Some can be claimed directly on a tax return, but others involve mailing paperwork to the Department of Health and Human Services. Tax preparation companies say the IRS has told them it’s taking steps to make sure taxpayers’ returns don’t languish in bureaucratic limbo while HHS rules on their waivers.

TurboTax has created a free online tool called “Exemption Check” for people to see if they may qualify for a waiver. Charges apply later if the taxpayer files through TurboTax.

Timing will be critical for uninsured people who want to avoid the rising penalties for 2015.

That’s because Feb. 15 is the last day of open enrollment under the health law. After that, only people with special circumstances can sign up. But just 5 percent of uninsured people know the correct deadline, according to the Kaiser poll.

“We could be looking at a real train wreck after Feb. 15,” said Stan Dorn, a health policy expert at the nonpartisan Urban Institute. “People will file their tax returns and learn they are subject to a much larger penalty for 2015, and they can do absolutely nothing to avoid that.”

The insurance requirement and penalties remain the most unpopular part of the health care law. They were intended to serve a broader purpose by nudging healthy people into the insurance pool, helping to keep premiums more affordable.

Sensitive to political backlash, supporters of the health care law have played down the penalties in their sign-up campaigns. But stressing the positive – such as the availability of financial help and the fact that insurers can no longer turn away people with health problems – may be contributing to the information gap about the penalties.

Dayson, the Phoenix resident, said she’s hoping her employer will offer a health plan she can fit into her budget, allowing her to avoid higher fines for 2015.

In Des Moines, recent college graduate Moon has held a succession of temporary local and state government jobs that don’t provide affordable coverage. The penalties are on his mind.

“When it gets up to $325, I hope I have a career that actually offers me a good health care plan,” he said.