11:54am

Thu June 28, 2012
Politics

The Mandate: How Penalties And Benefits Work

The Supreme Court's 5-4 decision upholding the Affordable Care Act includes a controversial mandate requiring Americans to buy insurance, beginning in 2014.

The argument for the mandate: People who do not have health insurance likely will end up in the hospital someday, covered by taxpayers, so they should pay a tax to help cover that cost. The mandate also increases the number of people insured, which insurance companies say they need to cover people with pre-existing conditions.

Opponents had argued against the mandate, claiming it was unconstitutional to compel citizens to buy a product from a private company. But the highest court in the land disagreed, saying the penalty was a legal tax.

When the mandate takes effect in 2014, some people might instead choose simply to pay the penalty that the government would impose for not complying. The penalties for not having insurance start as low in as $95, or one percent of a worker’s income – whichever is higher.

Even a family of four with an income of $100,000 a year would only pay $2,500 in penalties to avoid buying a $10,000 health insurance policy in 2016.

And that family of four could reap a $5,000 subsidy if its income were just lower, at $60,000 a year.

How much will you receive in subsidies – or pay in penalties under the health law? Here are examples, and links to sites where you can calculate your own subsidies and penalties.

Calculate your subsidy here, and penalty here. 

Penalty calculation:

  • 2014 – Whichever is higher: $95 per person up to three people ($285), or 1 percent of taxable income.
  • 2015 – Whichever is higher: $325 per person up to three people ($975), or 2 percent of taxable income.
  • 2016 – Whichever is higher: $695 per person up to three people ($2,085), or 2.5 percent of taxable income.

Here are some examples. (Penalty is in bold)

SINGLE PERSON, age 30

(Income of $14,000 a year or less qualifies for free Medicaid insurance)

Income $40,000

Will receive no subsidy, as income is too high to qualify. Estimated cost of health insurance: $3,440

2014: $95 or .01x$40,000 = $400

2015: $325 or .02x40000 = $800

2016: $695 or .025x40000 =$1,000

Income $60,000

Will receive no subsidy, as income is too high to qualify. Estimated cost of health insurance: $3,440

2014: $95 or .01x$60,000 = $600

2015: $325 or .02x$60,000 = $1,200

2016: $695 or .025x$60,000 = $1,500

Income $100,000

Will receive no subsidy, as income is too high to qualify. Estimated cost of health insurance: $3,440

2014: $95 or .01x100000= $1,000

2015: $325 or .02x100000=$2,000

2016: $695 or .025x100000=$2,500

FAMILY OF FOUR, top age 30

(Income of $30,000 or less qualifies for free Medicaid insurance)

Income $40,000

Qualifies for a subsidy of $8,126 on estimated insurance cost of $10,108

2014: $285 or .01x$40,000 = $400

2015: $975 or .02x$40,000 = $800

2016: $2085 or .025x$40,000 = $1,000

Income $60,000

Qualifies for subsidy of $5,172 on estimated insurance cost of $10,108

2014: $285 or .01x$60,000 = $600

2015: $975 or .02x$60,000 = $1,200

2016: $2085 or .025x$60,000 = $1,500

Income $100,000

Will receive no subsidy, as income is too high to qualify. Estimated cost of insurance: $10,108

2014: $285 or .01x$100,000=$1,000

2015: $975 or .02x$100,000=$2,000

2016: $2,085 or .025x$100,000=$2,500

Sources: National Federation of Independent Business, Henry J. Kaiser Family Foundation and Colorado Department of Health Care Policy and Financing.