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I've been trying to figure out how much the tax will cost someone who doesn't have have health insurance once the individual mandate comes into effect. Information is extraordinarily difficult to find.


What follows is irrelevant, but simply shows to prove that I've at least tried to answer my own question.

The first note is that the "flat fee" will ramp up over the next three years (1, 2):

  • $95 for calendar year 2014
  • $325 in 2015
  • $695 in 2016
  • indexed to the federal poverty level after that

Ignoring the gradual ramp-up over the next two years (for simplicity sake), and assuming a single person filing alone (for simplicity sake), the tax liability is:

Income  Cost
======  ====
(all)   $695

Next we note that there is one exemption for people whose income is so low that they do not have to file a tax return(3). That filing threshold (known as the Federal Poverty Level, currently $10,000 for Tax Year 2013 (4)), is the amount of deductions everyone gets ($3,900 personal exemption + 6,100 standard deduction). In other words, if your taxable income (income after deductions) is zero, you do not have to pay the penalty. With this information we update the chart:

Income            Cost
================  ====
0 - $10000           0  ($3900 personal exemption + $6100 standard deduction = $10000)
$10000 and over   $695

Next is the note that the tax penalty is actually 2.5% of your taxable income, or $695, whichever is greater. (4). This is where things start to get difficult:

Income            Taxable Income    Cost
================  ==============    ====
0 - $10000        0                    0  $3900 personal exemption + $6100 standard deduction = $10000
$10000 - $37800   0 - $27800        $695  $695 is larger than 2.5% of taxable income
$37800 and over   $27800 and over   2.5%  Over $37800, 2.5% of taxable income dominates

Next is the note that anyone making less than 133% of the Federal Poverty Level (FPL) (5) is exempt. Medicaid coverage will also be extended to anyone making less than 133% of the FPL (in good states. For the purposes of this discussion, let's assume you live in one of those good states). This means that you have health care coverage, and so do not have the pay the penalty. The 133% FPL is currently $14,856:

Income            Taxable Income    Cost
================  ==============    ====
0 - $10000        0                    0  $3900 personal exemption + $6100 standard deduction = $10000
$10000 - 14856    0 - $4856            0  Health insurance coverage through Medicaid
$14856 - $37800   $4856 - $27800    $695  $695 is larger than 2.5% of taxable income
$37800 and over   $27800 and over   2.5%  Over $37800, 2.5% of taxable income dominates

Now we have the note that the fee can't be over 8% of your income; otherwise you are exempt (6). I assume they mean 8% of taxable income:

Income              Taxable Income    Cost
==================  ================    ====
0 - $10000          0                    0  $3900 personal exemption + $6100 standard deduction = $10000; exempt
$10000 - 14856      0 - $4856            0  Health insurance coverage through Medicaid; exempt
$14856 - $18787.50  $4856 - $8687.50     0  $695 exceeds 8% of taxable income; exempt
$18787.50 - $37800  $8687.50 - $27800 $695  $695 is larger than 2.5% of taxable income
$37800 and over     $27800 and over   2.5%  Over $37800, 2.5% of taxable income dominates

At some point I realize that 2.5% of your income would exceed the cost of the Bronze plan on an exchange; and it would be cheaper to actually buy insurance. That is the next question: what is the "Bronze" plan cost, and at what income level will I become exempt from the fee, because I bought insurance. Current estimates of basic health care coverage are at $375 per month ($4,500 per year). For someone making over $190,000, it would be cheaper for them to pay the $4,500, rather than continue to pay a penalty. So we update can update the chart:

Income              Taxable Income     Cost
==================  =================  ==========
0 - $10000          0                           0  $3900 personal exemption + $6100 standard deduction = $10000; exempt
$10000 - 14856      0 - $4856                   0  Health insurance coverage through Medicaid; exempt
$14856 - $18787.50  $4856 - $8687.50            0  $695 exceeds 8% of taxable income; exempt
$18787.50 - $37800  $8687.50 - $27800        $695  $695 is larger than 2.5% of taxable income
$37800 - $190,000   $27800 - $180,000  $695-4,500  2.5%  Over $37800, 2.5% of taxable income dominates
over $190,000       over $180,000          $4,500  Over $190,000, you might as well just buy health care

Also, how does the government health insurance premium assistance sliding scale for people making less than 400% of the Federal Poverty Level ($44,680) affect things?

Bonus Chatter

A "Bronze" plan defines the minimum coverage that a health insurance plan must cost:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

For people making up to 400% of the Federal Poverty Level ($44,679), the cost of a Bronze plan is capped at 9.5% of your income. That means that (at the current poverty level), the highest cost of a plan is $4,244 (cheaper than what you would currently pay for health care). People making less than 400% FPL get increased subsidizes.

  • 1
    I'm not sure this can be answered as key parts have yet to be anywhere near implemented to have final and formalized regulation that any one can understand. – Ryathal Jul 9 '13 at 14:25
  • "and it would be cheaper to actually buy insurance" note that that may not be the case once this all comes into play, the cost of insurance will go up for some (as we're not covering the entire population, including the at-risk demographics) and plans now have to cover more than they previously did. – user1530 Jul 12 '13 at 19:45
  • Is this price per person in household or entire household? – user1943 Jul 29 '13 at 23:39
  • To be more specific, costs are estimated to go up in the individual market by about 14%, but half of those who experience that rate hike will be eligible for subsidies. – Avi Jul 30 '13 at 4:29
  • @Wsf I was only calculating cost "per person". – Ian Boyd Jul 30 '13 at 14:25
2

For tax year 2016, the penalty will rise to 2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child, to a maximum of $2,085. For tax year 2017 and beyond, the percentage option will remain at 2.5%, but the flat fee will be adjusted for inflation.

https://www.nerdwallet.com/blog/health/how-much-is-the-obamacare-penalty-not-having-health-insurance/

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