Lack of insurance coverage is becoming an expensive problem
Those that do not have health insurance may be surprised to find themselves with fines levied against them by the federal government after they file taxes. This year, those filing taxes must inform the Internal Revenue Service of their insurance status. Those without coverage will face a fine, while those with coverage will not. The average fine for those that have not had coverage over the past year will be $95, or 1% of a household income, whichever is greater. The fine is set the increase this year.
Average fine for those without insurance expected to be $301
According to TurboTax, the average penalty for those without health insurance coverage in 2014 is expected to be $301. Many people may be surprised to find that they will be paying a larger penalty because of their lack of insurance coverage than they had expected. The $95 fine is the minimum penalty under the Affordable Care Act, which the majority of those without health insurance coverage will not be paying. Instead, most of these people will be paying a larger fine that is based on their household income.
Penalty aims to encourage people to buy health insurance
The penalty is meant to pressure consumers to purchase health insurance coverage. The Affordable Care Act makes health insurance mandatory for all consumers, but these people may not be willing to purchase coverage, either because of its costs or because they have little need for coverage themselves. Because of the changes introduced by the Affordable Care Act, a lack of consumers with health insurance coverage could place the insurance industry under significant financial strain, which would cause insurance costs to grow exponentially.
Those purchasing insurance this year can avoid fines in 2016
There is still time for those that want to avoid the federal fine to purchase insurance coverage. Unfortunately, those that did not have coverage last year will still be subject to the fine for 2014, but purchasing insurance through a state exchange this year will allow consumers to avoid the fine for 2015. The fines are issued during tax season, when consumers file their taxes with the Internal Revenue Service.