Friday, March 7, 2014
Buy health insurance or pay a penalty.
EXEMPTIONS FROM AFFORDABLE CARE ACT PENALTIES
Americans aren't subject to IRS penalties for not buying health insurance if they:
• Are uninsured for less than three months of the year.
• Are determined to have very low income and coverage is considered unaffordable (defined as more than 8 percent of their income). For someone earning $30,000, that would be a premium that exceeds $2,400 a year (which may be the case in some situations, even on the exchange).
• Are not required to file a tax return because their income is too low.
• Would qualify for Medicaid coverage under new guidelines, but their state has chosen not to expand Medicaid eligibility (Maine is one of these states).
• Are a member of a federally recognized Indian tribe.
• Participate in a health care sharing ministry.
• Are a member of a recognized religious sect with objections to health insurance.
Source: Centers for Medicare and Medicaid Services
That's the incentive -- or what critics would call a threat -- that Congress built into the Affordable Care Act in 2010 to encourage all Americans to buy coverage.
Attacked by opponents as an unwanted intrusion into free choice, the individual mandate issue went all the way to the U.S. Supreme Court, which decided in 2012 that the requirement was legal.
But for all of the fierce political and ideological battles over the requirement, experts working on the front lines to implement the law on Oct. 1 say the penalty lacks muscle. And they say consumers don't seem to be concerned about being forced to purchase insurance.
"When we have a chance to explain it to people, it's been very positive," said Libby Cummings, an outreach specialist at Portland Community Health Center. "People are excited about it and want to have health insurance. People see it as an opportunity to get coverage that was never open to them before."
Cummings' job includes identifying people eligible to buy insurance and helping them choose a plan on Maine's new health exchange, which begins accepting enrollments Oct. 1. The insurance options on the exchange are open to Mainers who don't have insurance and are now self-insured.
Consumers must choose a plan by March 31. Cummings said the key issue people are concerned about is whether they can afford it, not whether they are forced to purchase insurance.
The penalty for failing to buy coverage -- $95 in 2014 before scaling up in subsequent years -- is modest compared to the cost of health insurance, and people can also take advantage of broad exceptions to avoid paying the penalty.
For instance, people can avoid buying insurance and sidestep the penalty by declaring that the insurance available -- even on the exchange -- is unaffordable. Insurance is deemed unaffordable if premiums exceed 8 percent of total income.
The federal government also does not currently have much power to enforce the penalty, experts say. The penalty, which the government calls a fee, will be assessed by the Internal Revenue Service on individuals' income tax returns, beginning in 2015 for the 2014 tax year.
"We don't believe a whole lot of people are going to be paying the penalty," said Trish Riley, a senior fellow at the Muskie School of Public Service at the University of Southern Maine.
For customers looking to purchase insurance on the exchange, the penalty is not the primary issue, said Kevin Lewis, president of Maine Community Health Options, one of the two insurance providers on the exchange. The other provider is Anthem.
"I don't think the penalty is going to be the driving force behind whether people purchase health insurance. Affordability is going to be the driving force," Lewis said.
Part of the reason may be that "young invincibles" -- the uninsured between 18 and 29 often predicted to resist purchasing health insurance -- may instead be looking to buy it. According to a Robert Wood Johnson Foundation study, only 26 percent of uninsured young adults believe they don't need health insurance.
"Most of the young invincibles apparently do not believe they are so invincible that they do not need health insurance, suggesting that well targeted outreach and enrollment efforts may succeed," said the report, published this month by the New Jersey think tank.
Wendy Wolf, president and CEO of the Augusta-based Maine Health Access Foundation, whose mission includes improving access to quality health care, said she's not surprised at the results of the survey of young adults.
"There's this idea that young people don't think they need insurance. That's not true. Young people sense a vulnerability when they don't have insurance," Wolf said.
(Continued on page 2)