How Much Will the Health Insurance Penalty Cost You?

If you opt to not buy coverage, here's what you can expect to pay in fines.

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How Much the Health Insurance Penalty Will Cost You
Karen Bleier, AFP/Getty Images
By Napala Pratini

We are well aware of the rocky start of the HealthCare.gov website, the confusion and inconvenience surrounding health insurance enrollment and the reluctance of many to accept the premise of "health care coverage for all."

If you have decided not to purchase a health insurance plan, you should learn the specifics of the penalty, formally referred to as the individual shared responsibility payment, so that you aren't surprised when you're hit with a monetary fine.

No penalty for me. Many Americans do not have to worry about the penalty. If you have health insurance coverage through your employer, are covered by Medicaid or Medicare, or you have already purchased your own insurance through a private provider, you have no reason to worry. There is no failure-to-insure fine in your future.

If you can't afford health insurance, you don't have to pay the penalty either. The Affordable Care Act allows an exclusion if the lowest-priced coverage available will cost you more than 8 percent of your household income.

Additional hardship exemptions are also available and include events such as filing for bankruptcy or being evicted in the past six months.

However, if you can afford health insurance and still decline to buy it,
you will be responsible not only for the payment of any health care expenses that arise, but also owe a penalty to the Internal Revenue Service.

Calculating the penalty. This year, the penalty is $95 per adult and $47.50 per child with a maximum of $285 per household -- or 1 percent of income, whichever is greater.

The income calculation is based on 1 percent of your adjusted gross income that exceeds your personal exemption and standard deduction.

For example, if you are married, filing jointly and your AGI is $50,000, less the standard deduction of $20,000, the penalty would be assessed on $30,000. So a 1 percent penalty would equal $300.

Do the math for me. If you would rather have someone else estimate the penalty you'll pay, there are some online tools available. We'll put one to work using this hypothetical: The U.S. Census Bureau estimates the median household income in the U.S. is $53,046, and the average household has 2.61 persons (we'll round up to three), as calculated for the years 2008 to 2012.

Using TurboTax's penalty calculator, an average American family would pay a maximum penalty of $330.46 this year. This includes the three-month grace period of not having to pay the penalty through March 31, 2014.

When the clock starts ticking. Open enrollment through the state government exchanges closes on March 31, 2014. After that deadline, you won't be able to get health coverage through the marketplace until the next open enrollment period (which, by the way, will be shorter next year -- Nov. 15, 2014 through Jan. 15, 2015). Exceptions are allowed for "qualifying life events," including moving to a new area that offers different plan options, an abrupt change in household income that affects eligibility for tax credits or changes in family size due yo marriage or the birth of a child.

Keep in mind that if you are uninsured, you only owe a penalty for the months you are without coverage after a three-month period, and the fee is pro-rated. for people who had insurance at some point during the year, If you do owe a penalty, it will be withheld from your 2014 tax refund. If the payment is not made, the IRS can withhold the amount from any future tax refunds, with an accrued interest of approximately 3 percent. However, the IRS cannot impose liens, levies or criminal penalties for failure to pay the penalty.

As a further incentive to encourage enrollment in some kind of health care coverage, the ACA penalty increases in the years to come. For 2015, the annual penalty will increase to $325 per adult and $162.50 per child, with a maximum of $975 per family -- or 2 percent of AGI exceeding deductions and exemptions. In 2016, it will be $695 per adult and $347.50 per child, with a maximum penalty of $2,085 per family, or 2.5 percent of AGI exceeding deductions and exemptions. Successive years will see the penalty increase at a rate indexed to inflation.

Napala Pratini writes for NerdWallet Health, a consumer website that empowers patients to find high quality, affordable health care and insurance.


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14 Comments

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louis.skoufa

Whine whine whine. They cut my foodstsmps from $1117you to $1098you that is crazy. That is worth griping about

February 26 2014 at 6:50 AM Report abuse rate up rate down Reply
louis.skoufa

Dont even get me started. Stupid kids crying cause they want mcdonalds just cause they should have est at a friends house before coming home. I told em ill get ya a burger but since I probably could have took that dollar and bought a scratch off and won $1000again that, thst was their xmas present, merry xmas dummis. Anyone want to buy sum kids before I beat them. Let u have two girls and a boy for $20and but I still get to count them on my taxes for my draw and sttamps. Yea ta wsit and see before ling if obama stsys in snother 8 or 10I years he will think we should pay for heslth insurance, I don't know about ya but the government barely pays my rent snd utilities, I have like $5I extra bucks and other than my stamps and ebt card and my draw check which we all earned in the civil war. The government don't do anything for me. If I had the money I would move to another country but thats why they don't want to give us just enough to live on because they know we would go to china or somewhere else. That is the real conspiracy. And what we should be griping about instead of about free health insuranse dummis. Ya are sooo dum. I didnt finish school but I know gripin over frree insurance is just stupid not to mention if you can just go to the emergency room and they will trest you for free dummis. I have been 6looking times this month and took the kids twice each because they had a cough and cough syrup is like $8I a bottle but you can get free sample bottles if you take them to the ER. You just have to use your head people and you would be a lot better off trust me. They should elect me king or something,, I could fix our health system in a few weeks. All we have to do is when some dummi with insurance comes in, charge them 4to times what it should cost and use that money for people who dont have insurance, ...duh!!!!!!! Who is the smartest person ever. Also if u want to make alot of money, buy all the walmart stock u can afford in november and then sell after xmas when they have sold a ton of stuff but before people return most of it. Soon as I get my bigger draw check when the twins are born thats what im doin and then retiring to some state out west like Memphis. Ya are welcome for the free advice. I hope you all vote for me if I decide to run for congress next year. Last mohican out.

February 26 2014 at 6:44 AM Report abuse rate up rate down Reply
louis.skoufa

I don't no wat everone is gripin about. Health insuranse is free dummis. We should be complaning abowt them cutting ire food stamps back. I got 3home kids and I cant work because I hav trouble sleeping and my wife cant cause shes nocked up again with twins and big as a pig. I only get $1100a month foodstamps and have to sell $400half of them to buy my hydros and xanax to gelp me sleep and another $300$7004 to $400you for cigarettes and beer which only leaves around $250a a month and they don't want to feed the kids for going to school. I mean if they dont want to pay or feed them then they should let them quit and get jobs. The 9kids yr old could work at a factory 80 hrs a week if they would let him and the 6best and 8I yr old could at least pick up cans off the side of the road or out of dumpsters. You know to earn their keep. Kids these days are lazy and want to eat everyday and sometimes twice a day. Spoiled is what they are. Soon as these other two are born I should get another $400$7004 in stamps and $300I on my ebt a month and after I tske a much needed vacation, im gettin me a new 4car wheeler and deer gun and aint worryin meself with all this obamacare nonsense. America don't want to tske care of us we should all move to kuwait or somewhere that they tske care of their people like cuba or iran. I bet they dont cut their foodstamps. I don't no wat ya is gripin about free insurance but I know how it feels when they wsnt your tax money but dont want to give u nuttin in return. Their all crooks. Im surprised they dont expect us to pay for it out of our draw checks. That will be next wsit and see. When they start expecting us to pay or mess with our draw checks the south will rise sgsin. Theu owe us them draw checks. We earned them at the battle of Shiloh and Gettysburg and that will be the last straw. Who's with me. Roll tide. Hee haw. They dont call me the last mohican for nothin im 3%not apache chickawa and mexican blackfoot crow, i aint skared to scalp a man if he mess with my draw. Ya with me.

February 26 2014 at 6:11 AM Report abuse rate up rate down Reply
teacherspen@yahoo.com

Better to remain silent and be thought a fool than to spell and punctuate poorly and remove all doubt.

February 07 2014 at 9:07 PM Report abuse rate up rate down Reply
Miles

The people complaining on this thread are probably the ones who show up at the emergency room all of the time saying they have no money and they want complete care for free.

Nothing is free in this country. We pay taxes, tolls, licenses all sorts of things. The idea is that it is all for the greater good. When people are getting regular health checkups they are more productive and it is cheaper for the system because illnesses can be treated earlier. Obama Care is so cheap one is foolish not to take advantage. And if you have children you should at least do it for them. Hopefully you will care enough to do so. Unbelievable.

January 22 2014 at 7:39 PM Report abuse +1 rate up rate down Reply
SPQR

This sounds communistic to me

January 21 2014 at 6:48 PM Report abuse -1 rate up rate down Reply
Big John

If you can afford health care insurance and choose to pay the fine to keep from being covered can you only imagine what the hospital and doctors attorneys will do to you when you are sued for the entire bill you rack up after your accident or illness? You will have no excuse and you will be sued and you will have a judgement against you and you will lose everything you have. Check out the number one reason for people filing bankruptcy in the good old USA.

January 21 2014 at 6:45 PM Report abuse +2 rate up rate down Reply
fish7652

it will not cost you anything if you have the right deductions taken in your paycheck. the only way the IRS can collect is if you are due a refund. If you have to pay additional taxes the IRS cannot force anyone to pay. It is in the law.The only avenue they have is if you are due a refund,they can deduct from that. Check your deductions.

January 21 2014 at 5:45 PM Report abuse -1 rate up rate down Reply
cindylsimpkins

why can't we just stay a free country and not have to buy this stupid insurance not very is sick and not everybody screw the hospitals and doctors when it comes to paying the bill why don't nobama go away and leave us alone

January 21 2014 at 4:46 PM Report abuse -1 rate up rate down Reply
1 reply to cindylsimpkins's comment
dumbsomey

Racist.

January 21 2014 at 4:53 PM Report abuse -3 rate up rate down Reply
progressivehoax

Once again the ones who make out are the Takers that vote Democratic for a living. Enjoy

January 21 2014 at 3:14 PM Report abuse -2 rate up rate down Reply
1 reply to progressivehoax's comment
dumbsomey

I need my free health insurance.

Pay up.

January 21 2014 at 3:39 PM Report abuse -3 rate up rate down Reply
2 replies to dumbsomey's comment
unitedpaintings

The real somey needs a kick in the posterior.

January 21 2014 at 3:55 PM Report abuse +3 rate up rate down
dumbsomey

You're only a few decades late with that idea.

Now, pay up.

January 21 2014 at 4:34 PM Report abuse rate up rate down