Four Million Americans Will Pay Fines Instead of Health Insurance Bills Posted: May 29th, 2010
By the time new health insurance laws take full effect in 2016, the Congressional Budget Office (CBO) estimates as many as four million Americans may pay the new regulations' penalty. Following a similar rule in Massachusetts, the penalty forces each uninsured citizen to pay a $695 flat fine or an income-based fine of up to 2.5% of annual income--whichever is more.
Lawmakers initially designed the rule to force more Americans into coverage pools; however, industry observers suggest many may prefer to pay a small penalty each year than write a check to an insurance company every month.
Some Americans will choose fines over health insurance coverage
An April 2010 report revealed government experts expect more than 21 million Americans to remain uninsured by the 2016 deadline. Because the Internal Revenue Service must collect the penalties from uninsured Americans, CBO analysts predict 17 million Americans won't pay any fines at all because they fall outside the requirements for filing tax returns.
Of the four million taxpayers expected to pay some kind of penalty, more than two-thirds earn more than $96,000 in annual income. In media reports, CBO representatives suggested members of this population may include:
- Young adults eligible for coverage under their parents' plans. Because the IRS will base penalties on the uninsured's annual income, a shrewd parent could reimburse their child for the base $695 penalty.
- "Underemployed" Americans who opt out of employer-sponsored plans unless a severe illness or injury forces them to seek last-minute coverage.
The CBO and Joint Committee on Taxation estimate the federal government stands to earn $4 billion per year in penalties between 2017 and 2019. Some lawmakers suggest increasing fines to drive interest to state-run health insurance programs.