Enroll During the ACA’s Overtime Period and Avoid a Penalty Kick
On Friday, we wrote about the Affordable Care Act, tax time, and the advent of the individual mandate—a requirement that all individuals who can afford health-care insurance purchase at least a minimally comprehensive plan. Recent surveys show that many uninsured tax filers were unaware or did not fully appreciate the scope of their potential penalty.
Last month, the U.S. Department of Health and Human Services announced that consumers who were uninsured for calendar year 2014 still have a chance to enroll for 2015 coverage and avoid a larger penalty. This “Special Enrollment Period” extends from March 15 to April 30 – nearly two weeks after the close of tax season.
The announcement of this additional enrollment period corresponds with a recently published report from McKinsey and Company showing that many of the “persistently uninsured” are unaware of the tax penalty or their potential financial assistance. Many of the tax filers are now realizing that the amount they owe could increase (and refunds be reduced) by these penalties, and that the penalties will get much larger in later years.
The 2014 penalty is either $95 per adult ($47.50 per dependent under the age of 18) or 1 percent of gross household income (above the tax-filing threshold), whichever is greater. For 2015, the per-adult penalty more than triples to $325 or 2 percent of income, and in 2016 it rises again to $695 or 2.5 percent of household income.
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After 2016, the penalty is indexed to inflation (Click to view larger image):
Household examples of the Shared Responsibility Payment (Click to view larger image):
These escalating penalties encourage individuals to enroll over time because in later years the cost of the potential penalty will eventually come close to the cost of the cheapest plan on the Marketplace (the penalty is capped at the least expensive “bronze” plan after financial assistance).
Consistent with the mandate, the McKinsey survey found that 51 percent of the “newly insured” report that the financial assistance they received enabled them to afford a quality health plan. A majority of those individuals (62 percent) revealed that, aside from the opportunity to provide an additional layer of security for their health and finances, the threat of a tax penalty was a substantial motivating factor in their decision to enroll.
The nonprofit community’s response
In North Carolina, MDC and its enrollment partners have seized upon this extended enrollment window by establishing stronger connections with the free tax assistance programs. Check out NC Get Covered to learn more about the tax penalty Special Enrollment Period.