I.R.S penalities are affordable than insurance

Advertisement  Clint Murphy let the deadline for getting health insurance by the new year pass without a second thought.

Mr. Murphy, an engineer in Sulphur Springs, Tex., estimates that under the Affordable Care Act, he will face a penalty of $1,800 for going uninsured in 2016. But in his view, paying that penalty is worth it if he can avoid buying an insurance policy that costs $2,900 or more. All he has to do is stay healthy.

“I don’t see the logic behind that, and I’m just not going to do it,” said Mr. Murphy, 45, who became uninsured in April after leaving a job with health benefits to pursue contract work. “The fine is still going to be cheaper.”

Two years after the Affordable Care Act began requiring most Americans to have health insurance, 10.5 million who are eligible to buy coverage through the law’s new insurance exchanges were still uninsured this fall, according to the Obama administration.

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That number appears to be shrinking: Administration officials said last month that about 2.5 million new customers had bought insurance through HealthCare.gov, the federal exchange serving 38 states, since open enrollment began on Nov. 1. The number of new enrollees is 29 percent higher than last year at this time, suggesting that the threat of a larger penalty may be motivating more people to get covered.


Tim Fescoe, a visual effects artist in Culver City, Calif., dropped his health plan, in part because it seemed too bare-boned. Credit Annie Tritt for The New York Times
But plenty of healthy holdouts remain, and their resistance helps explain why insurers are worried about the financial viability of the exchanges over time. They say they sorely need more healthy customers to balance out the costs of covering the sicker, older people who have flocked to exchange plans.

People, like Mr. Murphy, who earn too much to qualify for federal subsidies that defray the cost of coverage may be most likely to opt out. A recent analysis by the Kaiser Family Foundation found that more than seven million people who are eligible for exchange coverage would pay less in penalties than for the least expensive insurance available to them. More than half would not qualify for subsidies, the analysis found.

Ben Wakana, a spokesman for the Department of Health and Human Services, said people would still be better off buying insurance.

“We understand some people may be thinking through their choice of coverage, but going without health insurance is a serious gamble that can be catastrophic if wrong,” Mr. Wakana said.

Many holdouts have made their decisions after meticulously comparing the cost of insurance premiums and deductibles with paying for doctor appointments, lab tests and prescriptions themselves. For some healthy people, the combined cost of premiums and deductibles, which can exceed $10,000, makes the penalty seem a better deal.

For 2016 and beyond, the penalty will be $695 per adult or 2.5 percent of household income, up from $325 per adult or 2 percent of household income last year.

Susan Reardon, 61, of Kalamazoo, Mich., said she was leaning toward going uninsured this year. She calculated that she would have to spend more than $12,000, including premiums of nearly $500 a month and a $6,850 deductible, to get anything beyond preventive benefits from the cheapest exchange plan available.

Ms. Reardon, whose husband is old enough to be covered by Medicare, said she would rather pay out of pocket for the drugs she takes for fibromyalgia and the handful of doctor appointments she tends to need each year.

If something catastrophic happens, she said, “I feel like it’s better just to die.” Advertisement