The overhaul of health insurance by the Affordable Care Act of 2010 (ACA), or more popularly called “ObamaCare,” remains controversial, even as the program’s deadline for enrollment and actual coverage looms large.
Because the ACA makes it mandatory for Americans to buy health insurance or pay a fine, several states thought it was unconstitutional and sued. That was put to rest last year when the Supreme Court ruled that the mandate’s “fine” is just another way to tax.
Since 2010, the House of Representatives has voted 40 times to repeal or defund ObamaCare. But all that time, effort and tax dollars spent managed to accomplish is to keep the controversy hot and in the spotlight.
In Rhode Island, however, the issue is settled. As of Oct. 1, 2013, everyone not covered through work or by some other insurance, or are otherwise exempt from the law, has just six months to sign up for one of the 12 insurance plans offered through HealthSource RI (HSRI), the state’s new insurance marketplace.
Although some health care benefits provided by the ACA have already kicked in, the insurance policies themselves will take effect on Jan. 1, 2014.
That’s the law and anyone who ignores it will pay a price. It’s much like the state requiring that all drivers have at least liability insurance on their cars. If a policeman asks you for proof of automobile insurance and you don’t have it, you pay a fine.
Under ObamaCare, when you file your federal income tax for next year on or before April 15, 2015, the Internal Revenue Service will ask you for proof of health insurance. If you don’t have coverage on yourself, your children and anybody else you claim as a dependent, you’ll be charged a penalty tax.
The tax isn’t too stiff to start with – either 1 percent of the family’s income, or up to $95 for each adult and $47.50 for each child, whichever is more, according to Dara Chadwick of HSRI.
But it’s set to increase quickly, until when taxes are filed for 2016, it will be up as high as $695 per adult and $347 per child (or a maximum of $2,085 penalty tax per family), or an assessment of 2.5 percent of the family’s income, whichever is greater.
Just how the new tax forms will look and work will be decided by the IRS during the coming months. But information to help people avoid paying the extra taxes will be made available by HSRI, insurance providers and the IRS itself.
Some Rhode Islanders will be exempt from the health insurance mandate. Obviously, if your employer provides your coverage – including COBRA or retirement plan – or you have a plan you bought for your family, you don’t have to purchase a plan through HSRI.
If your income is so low you aren’t required to file a tax return, or the premium available through HSRI costs more than 8 percent of your income, you’re exempt.
Anyone earning 138 percent of the Federal Poverty Level in Rhode Island will be eligible for health insurance under Medicaid. That means a single person making up to $15,856 and a family of four making up to $32,499, for example, can be covered by Medicaid and therefore exempt from the mandate.
Everyone covered by Medicare (and Medicare Advantage), CHIP, some Veterans Administration health programs, or TRICARE coverage for those in the military and their dependents, will all satisfy the ACA requirements.
Native Americans who are eligible for care through the Indian Health Care service, people whose religion has prohibitions against having insurance coverage, members of a health care sharing ministry such as Samaritan Ministries and Christian Healthcare Ministries, are also exempted under the law.
People who experience a gap of three consecutive months or less during the year won’t have to pay a penalty tax because of that period.
And finally, immigrants here illegally and persons in prison are obviously not covered under the law.
The Congressional Budget Office estimates that in 2016, when all the major provisions of the ACA are implemented, something like 24 million Americans will be legally exempt from purchasing health insurance. Everybody else must have coverage.
Impact on businesses
Those are the rules for the individual mandate. The ACA treats businesses a little differently.
“There is no mandate for employers with 50 or fewer employees,” Chadwick said. “The mandate for larger businesses with 50 or more has been delayed until 2015. However, it’s important to note that 98 percent of large employers in Rhode Island already offer insurance.”
Topher Spiro, vice president of the Center for American Progress, during a recent PBS interview, said that the ACA’s goal is to insure as many people as possible in this country, including those with health issues that would either prevent them from being insurable or make costs unaffordable.
“This individual mandate is to keep premiums low for everyone,” he said. “If you don’t have incentives for everyone to sign up for coverage, then only the sick people will enroll, which will drive up premiums.”
But Joseph Antos, an economist with American Enterprise Institute, thinks the tax penalty for ignoring the law is too low. He believes that some people may just pay the extra tax and remain uninsured. He also wonders if the IRS has the capability to catch tax cheats who simply don’t report they’re without insurance.
“I would argue that the individual mandate is largely unenforceable and does not turn out to be this solution to the other problems that raise insurance costs,” Antos said.
The ACA was written to attempt to make health care affordable for the greatest number of Americans. To work as advertised, it must have a big number of those who currently have no insurance – young, old, healthy and sick – enroll and pay premiums.
Everyone who has worked to put HealthSource RI together is hoping that the well-used “reward and punishment” approach works, where quality, affordable health care is the carrot and paying higher taxes for saying no to ObamaCare is the stick.