Obamacare tax penalty to hit nearly 6M uninsured people

By the AP

Nearly 6 million Americans – significantly more than first estimated – will face a tax penalty under President Barack Obama’s health overhaul for not getting insurance, congressional analysts said Wednesday. Most would be in the middle class.

The new estimate amounts to an inconvenient fact for the administration, a reminder of what critics see as broken promises.

The numbers from the nonpartisan Congressional Budget Office are 50 percent higher than a previous projection by the same office in 2010, shortly after the law passed. The earlier estimate found 4 million people would be affected in 2016, when the penalty is fully in effect.

That’s still only a sliver of the population, given that more than 150 million people currently are covered by employer plans. Nonetheless, in his first campaign for the White House, Obama pledged not to raise taxes on individuals making less than $200,000 a year and couples making less than $250,000.

And the budget office analysis found that nearly 80 percent of those who’ll face the penalty would be making up to or less than five times the federal poverty level. Currently that would work out to $55,850 or less for an individual and $115,250 or less for a family of four.

Average penalty: about $1,200 in 2016.

“The bad news and broken promises from Obamacare just keep piling up,” said Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee, who wants to repeal the law.

Starting in 2014, virtually every legal resident of the U.S. will be required to carry health insurance or face a tax penalty, with exemptions for financial hardship, religious objections and certain other circumstances. Most people will not have to worry about the requirement since they already have coverage through employers, government programs like Medicare or by buying their own policies.

A spokeswoman for the Obama administration said 98 percent of Americans will not be affected by the tax penalty — and suggested that those who will be should face up to their civic responsibilities.

“This (analysis) doesn’t change the basic fact that the individual responsibility policy will only affect people who can afford health care but choose not to buy it,” said Erin Shields Britt of the Health and Human Services Department. “We’re no longer going to subsidize the care of those who can afford to buy insurance but make a choice not to buy it.”

The budget office said most of the increase in its estimate is due to changes in underlying projections about the economy, incorporating the effects of new federal legislation, as well as higher unemployment and lower wages.

The Supreme Court upheld Obama’s law as constitutional in a 5-4 decision this summer, finding that the insurance mandate and the tax penalty enforcing it fall within the power of Congress to impose taxes. The penalty will be collected by the IRS, just like taxes.

The budget office said the penalty will raise $6.9 billion in 2016.

The new law will also provide government aid to help middle-class and low-income households afford coverage, the financial carrot that balances out the penalty.

Nonetheless, some people might still decide to remain uninsured because they object to government mandates or because they feel they would come out ahead financially even if they have to pay the penalty. Health insurance is expensive, with employer-provided family coverage averaging nearly $15,800 a year for a family and $4,300 for a single plan. Indeed, insurance industry experts say the federal penalty may be too low.

The Supreme Court also allowed individual states to opt out of a major Medicaid expansion under the law. The Obama administration says it will exempt low-income people in states that opt out from having to comply with the insurance requirement.

Many Republicans still regard the insurance mandate as unconstitutional and rue the day the Supreme Court upheld it.

However, the idea for an individual insurance requirement comes from Republican health care plans in the 1990s.

It’s also a central element of the 2006 Massachusetts health care law signed by then-GOP Gov. Mitt Romney, now running against Obama and promising to repeal the federal law.

Romney spokeswoman Andrea Saul said Wednesday the new report is more evidence that Obama’s law is a “costly disaster.”

“Even more of the middle-class families who President Obama promised would see no tax increase will in fact see a massive tax increase thanks to Obamacare,” she said.

Romney says insurance mandates should be up to each state. The approach seems to have worked well in Massachusetts, with virtually all residents covered and dwindling numbers opting to pay the penalty instead.


  1. Richard Heckler on September 21, 2012 at 2:43 pm

    Here’s the question…..

    How can such a mandate be enforced or legitimate?

  2. Richard Heckler on September 23, 2012 at 5:20 am

    There is this claim that a few million who can afford medical insurance
    are not buying insurance.

    Says who?

    • BlazinEyes on October 11, 2012 at 12:19 pm

      There’s always a % of people who would prefer to spend their money on other things instead of health insurance, life insurance etc. it’s that feeling that healthy people carry that (I’m healthy, I’m ok and nothing’s going to happen to me anytime soon). Who really wants to buy insurance of any kind? We get it to be safe. Some people are risk takers.

  3. BlazinEyes on October 11, 2012 at 12:15 pm

    Isn’t that what makes it a “penalty”? No one ever said the “penalty” for not purchasing health insurance would ONLY apply to people with incomes over 200,000. You seem to be confusing the Affordable Healthcare Plan with Obama’s attempt to raise revenue with a tax increase of 3% on incomes 200,000 and over. The penalty for not purchasing health insurance would of course apply to middle class and wealthy, but something tells me that the wealthy are already purchasing health insurance because they can afford to pay the high rates. The middle class are the ones without because of high premium. The HCR is suppose to cause premiums to lower to a more affordable rate for the middle class. Poor have the Medicaid provision, which should still be available unless Romney and the Republicans win the Presidency and Congress.

  4. tom ferguson on October 11, 2012 at 12:17 pm

    well, if there aren’t any then the penalty applies to no one. it’s a
    big country, lots of variety… could of course avoid the whole discussion & institute an improved medicare for all. this is unmentionable i know, even tho a majority support it… as usual what is politically feasible is determined by ideologues & the elite class who feel threatened by democracy and sharing.