Penalty for those without health insurance in 2015 will be significantly higher than for 2014; Feb. 15 is deadline to sign up

Wall Street Journal photo illustration

One aspect of the Patient Protection and Affordable Care Act supporters don't spend much time talking about is the part of the law that imposes a penalty on those who don't have insurance, but the time has come for the uninsured to pay up.

This is the first year taxpayers are required to report to the Internal Revenue Service whether they have health insurance, and charged a fine if they don't, as required by the federal health care law.

This year's fine is $95 per adult or 1 percent of the household income, whichever is greater. This fine will increase significantly in 2015 to $325 per adult or 2 percent of household income, whichever is greater. And will increase again in 2016 to $695 per adult or 2.5 percent of income, whichever is greater.

Dayna Dayson of Phoenix, Ariz., estimates that she’ll have to pay $290 in fines this year when she files her federal return, Ricardo Alonso-Zaldivar reports for The Associated Press. Dayson, who’s in her early 30s and works in marketing, said she would like to have health insurance, as required by the law, but can't afford it.

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

It is too late to avoid this year's penalty, unless you qualify for one of about 30 exemptions, most of which are related to financial hardships, Alonso-Zaldivar notes, but you can avoid a penalty next year if you sign up for health coverage by Feb. 15, the last day of open enrollment.

Kentuckians can sign up for health insurance through Kynect, the state's health insurance exchange. Jan. 15 is the deadline to get covered by Feb. 1 and those who sign up by Feb. 15, the final enrollment deadline for 2015, will get coverage beginning March 1. Medicaid enrollment is open year-round.

"Roughly 4 million uninsured people will pay penalties and 26 million will qualify for exemptions from the list of more than 30 waivers," H&R Block says in a congressional analysis, Alonso-Zaldivar reports.

One reason many of the uninsured will end up paying a 2015 fine is that they don't know about the larger fine or the sign-up deadline to avoid this penalty.

Only 3 percent of uninsured people know what the fine for 2015 will be, according to a recent poll by the Kaiser Family Foundation. And just 5 percent of uninsured people know the correct deadline, according to a Kaiser poll, Alonso-Zaldivar reports.

“We could be looking at a real train wreck after Feb. 15,” Stan Dorn, a health policy expert at the nonpartisan Urban Institute, told AP. “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.”

Alonso-Zaldivar suggests one reason people don't know about the penalties could be because they are the "most unpopular part of the health care law" and supporters have "played down the penalties in their sign-up campaigns" to avoid "political backlash."

If you are interested in estimating your potential fine or seeing if you qualify for an exemption, Alonso-Zaldivar suggest going online and using the Tax Policy Center’s Affordable Care Act penalty calculator or using a free online tool called “Exemption Check" created by TurboTax.

While many, like Dayson, find paying for health insurance "doesn't fit into the budget," one way to save money when choosing a plan is to make sure you choose a plan with the best deductible option for your family, Michelle Andrews reports for Kaiser Health News.

Typical plans have a single out-of-pocket deductible that must be met for the entire family before insurance will start paying. But some plans offer both a total family deductible and a separate deductible for each family member. For example, a $3,000 deductible family plan might have separate $1,000 deductibles for each family member, Andrews reports.

This type of plan is a good option if one family member requires more medical care than the others over the course of the year, Sabrina Corlette, project director at Georgetown University's Center on Health Insurance Reforms, told Andrews.

This plan allows the insurance company to start paying for all of this one family member's medical bills after their embedded-individual-deductible is met, even if the family has not reached its total out-of pocket payment, Andrews writes.

You might have to call the plan directly to see if it offers this type of deductible, Corlette said.