Many See IRS Penalties as More Affordable Than Insurance

January 03 01:00 2016 by ushadmin

Clint Murphy let the deadline for getting health insurance by the new year pass without a second thought.

Mr. Murphy, an engineer in Sulphur Springs, Tex., estimates that under the Affordable Care Act, he will face a penalty of $1,800 for going uninsured in 2016. But in his view, paying that penalty is worth it if he can avoid buying an insurance policy that costs $2,900 or more. All he has to do is stay healthy.

“I don’t see the logic behind that, and I’m just not going to do it,” said Mr. Murphy, 45, who became uninsured in April after leaving a job with health benefits to pursue contract work. “The fine is still going to be cheaper.”

Two years after the Affordable Care Act began requiring most Americans to have health insurance, 10.5 million who are eligible to buy coverage through the law’s new insurance exchanges were still uninsured this fall, according to the Obama administration.

That number appears to be shrinking: Administration officials said last month that about 2.5 million new customers had bought insurance through HealthCare.gov, the federal exchange serving 38 states, since open enrollment began on Nov. 1. The number of new enrollees is 29 percent higher than last year at this time, suggesting that the threat of a larger penalty may be motivating more people to get covered.

But plenty of healthy holdouts remain, and their resistance helps explain why insurers are worried about the financial viability of the exchanges over time. They say they sorely need more healthy customers to balance out the costs of covering the sicker, older people who have flocked to exchange plans.

People, like Mr. Murphy, who earn too much to qualify for federal subsidies that defray the cost of coverage may be most likely to opt out. A recent analysis by the Kaiser Family Foundation found that more than seven million people who are eligible for exchange coverage would pay less in penalties than for the least expensive insurance available to them. More than half would not qualify for subsidies, the analysis found.