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As you’ve shopped for an Obamacare plan during open enrollment, you’ve probably determined your health insurance cost and potential subsidy amount for 2016. But what about the cost of going without coverage?
The cost of going without health insurance depends on factors such as what you will pay out of pocket if you need medical care and the tax penalty you could owe.
Under the Affordable Care Act, most Americans are required to have health insurance that qualifies as minimum essential coverage. This requirement is called the individual shared responsibility provision, which is sometimes known as the “individual mandate.”
Those who go without ACA-compliant health insurance for more than a single period of up to three months may owe a tax penalty called the individual shared responsibility payment. For every month you go without health insurance and are not exempt, you will owe 1/12th of the annual payment.
The 2016 penalty for not purchasing minimum essential coverage is the higher of these amounts:
The Obamacare tax penalty has increased annually since 2014, the first year individual shared responsibility provision took effect. A Kaiser Family Foundation analysis found that the average tax penalty for going without health insurance in 2016 will be $969—47 percent higher than the estimated average of $661 in 2015.
If you’ve been shopping for an Obamacare health insurance plan during open enrollment, you’ve probably calculated your estimated 2016 tax credit. Using the 2016 Health Insurance Cost and Subsidy Calculator at healthedeals.com, you can also estimate your tax penalty—the fee you would pay if you go without ACA-compliant health insurance coverage.
Of course, the true cost of going without health insurance could stretch beyond your estimated tax penalty. If you need healthcare while uninsured, you will be responsible for paying your medical bills out of pocket.
As The New York Times recently reported, there are some consumers who believe the tax penalty is more affordable than health insurance coverage. However, experts caution that this decision can be a gamble.
In addition to estimating their shared responsibility payment, you must consider what will happen if you or your family members have unexpected medical expenses and whether or not you are prepared to pay for them.
Speaking with a health insurance producer (i.e. agent or broker) can help you determine your options. If you are not eligible for premium tax credits or cost-sharing reductions, these professionals can help you explore on- and off-exchange coverage options that can potentially stretch your healthcare dollars and also prevent you from owing a penalty at tax time.
 IRS.gov. “The Individual Shared Responsibility Payment – An Overview.” Last updated Feb. 19, 2015. https://www.irs.gov/Affordable-Care-Act/The-Individual-Shared-Responsibility-Payment-An-Overview
 The Henry J. Kaiser Family Foundation. “Average Individual Mandate Penalty to Rise 47 Percent to $696 in 2016 for Uninsured People Eligible for ACA Plans [News Release].” Dec. 9, 2015. http://kff.org/health-reform/press-release/average-individual-mandate-penalty-to-rise-47-percent-to-969-in-2016-for-uninsured-people-eligible-for-aca-plans/
 Goodnough, Abby. “Many See I.R.S. Penalties as More Affordable Than Insurance.” The New York Times. Jan. 3, 2016. http://www.nytimes.com/2016/01/04/us/many-see-irs-fines-as-more-affordable-than-insurance.html
This document is for general informational purposes only. While we have attempted to provide current and accurate information, this information is provided "as is" and we makes no representations or warranties regarding its accuracy or completeness. The information provided should not be construed as legal or tax advice or as a recommendation of any kind. External users should seek professional advice from their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.
About The IHC Group
The IHC Group is an organization of insurance carriers and marketing and administrative affiliates that has been providing life, health, disability, medical stop-loss and specialty insurance solutions to groups and individuals for over30 years. Members of The IHC Group include Independence Holding Company (NYSE:IHC), American IndependenceCorp. (NASDAQ: AMIC), Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company. Each insurance carrier in The IHC Group has a financial strength rating of A- (Excellent) from A.M. Best Company, Inc., a widely recognized rating agency that rates insurance companies on their relative financial strength and ability to meet policyholder obligations. (An A++ rating from A.M. Best is its highest rating.) Collectively, the companies in The IHC Group provide insurance coverage to more than one million individuals and groups. For more information about The IHC Group, visit www.ihcgroup.com.
About IHC Specialty Benefits, Inc.
IHC Specialty Benefits, doing business as Health eDeals Insurance Solutions is a full-service marketing and distribution company that focuses on small employer, individual and consumer products. Health eDeals markets products through general agents online, telebrokerage, advisor centers, private label and directly to consumers. For more information about Health eDeals visit www.HealtheDeals.com.