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Breaking down health care penalties

Rochester, N.Y. - People thinking they won't purchase healthcare as required by the Affordable Health Care Act, and take their chances with the penalty - may want to think again.

13WHAM News has learned that the system that determines how much youll pay in penalties is quite complicated.

And you may pay more than you previously thought.

According to CPA Leah Powell with the Bonadio Group in Pittsford, there are many factors that determine what and how much those penalties will be.

Powell said the fines may seem low now, but they drastically escalate over the next two years.

Everybody says, oh, Ill just pay the $95, thats just one component of the calculation of penalty, Powell said.

Powell says, The penalty is the lesser of the monthly penalty amount or the amount you would pay for self only coverage on the exchanges at the bronze level.

Families and individuals would also be taxed based on household size and or a percentage of their income.

So while penalty flat amounts are listed as $95 for 2014; $325 for 2015 and $695 for 2016 you could pay more than that.

For example: a family of six making $45,000 annually would pay no more than $285 in 2014, the next year - that jumps to $975 and in 2016 - that family ends up paying $2,085.

According to Powell, the penalty amount is capped at three times the flat dollar amount.

A single person who opts not to buy insurance would have to pay anywhere from 1% to 2.5% over the next few years.

It all depends if a persons percentage of household income is greater than the filing threshold.

For example: a person making $50,000 annually would pay about $400 next year.

In 2015, they would pay $800 and $1,000 in 2016.

And if you think the government won't know whether or not you had insurance, Powell said that's not true.

Most employers and insurers will be required to report who has healthcare or not.

You will not be able to escape this, Powell said. If you're not subject to filing a tax return then you're not subject to a penalty, but if you are required to file a tax return and you're expecting a nice refund check, it could be reduced if you do not pay for paying the tax for having insurance.

As of now, if you're shopping for healthcare, you have until March 31st.

Coverage will go into effect January 1.

Powell said if you're not covered for less than three months during the year, you won't be subject to a penalty.

Exemptions under the Affordable Healthcare Act:

  • Members of certain religious sects or health care sharing ministries
  • If you are not a citizen or national of the United States
  • Incarcerated individuals.
  • Individuals who cannot afford coverage. 
    • If cost of coverage exceeds 8% of an individual's household income they are not required to obtain coverage. 
    • Coverage is self-only if through an employer sponsored plan or the lowest cost bronze plan through a state exchange.
  • Individuals whose household income is below the tax filing threshold.
  • Members of certain Indian tribes
  • Individuals who have coverage for less than 3 months during the year won't be subject to a penalty
  • Individuals who can certify they have suffered a hardship
 
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