Published February 23rd, 2016 by Stephanie
One of the central mandates of the Affordable Care Act is the tax penalty that hits you if you don’t have health insurance and you can’t show that your income was low enough that health insurance would have been unaffordable. While it started out fairly light, the penalty has been steadily increasing as the years pass.
The reason this penalty is such a lynchpin for the ACA is because of how health insurance works. While a large number of people don’t particularly need anything more than regular checkups and the occasional flu shot to stay healthy, especially young adults in their 20s and 30s, there are a few individuals who are stuck with chronic illnesses and need the help of specialists, surgeries, and expensive medication in order to keep on their feet.
Before the ACA, health insurance companies would regularly raise the rates of people in these situations or else drop them entirely. They would then be unable to get any new insurance on the grounds of having a “preexisting condition,” and since they couldn’t pay for their own hospital and pharmacy bills they would wind up untreated and constantly visiting the emergency room, which by federal mandate must accept everyone regardless of whether they can pay their bills.
The ACA changed that by eliminating preexisting conditions as a condition for getting health insurance or changing rates, and it also added several minimum standards of care to every policy, but in order to continue to make health insurance affordable the companies had one condition of their own: healthy young adults had to join the rolls of the insured in order to generate enough profit to cover the sick. Thus, the ACA also has a penalty for those who continue to go without insurance.
Understandably, the health insurance penalty is lighter for those who make less money, and not only can you avoid it if your income isn’t high enough but you can also get financial assistance in purchasing health insurance off the exchanges if your income is up to four times the federal poverty line.
Unfortunately, this assistance grows smaller the more money you make. This makes some sense, of course, since people who have more money can afford to spend more on their health care, but the problem is that not as many healthy people are signing up for insurance as predicted, and because of that health insurance companies are raising their rates in order to compensate. And because the financial assistance was based on these predictions, modest-income families which should have been fine with buying insurance are having to choose between too-expensive insurance or a growing tax penalty.
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