The Senate Republican tax bill includes the repeal of the Affordable Care Act’s individual mandate, the requirement that all Americans purchase qualifying health insurance or pay a penalty. The move could deal a serious blow to the health law.
The repeal of the mandate could result in an estimated 13 million more people without insurance within 10 years, but may potentially lead to federal savings of $338 billion, money that would be used to help pay for broad tax cuts for individuals and businesses. Here’s who pays the mandate’s penalty and how much it costs.
Percentage of Tax Returns Paying A.C.A. Penalty in 2015
About 6.7 million tax filers, or 4.5 percent, paid the penalty in 2015, down from 8.1 million in 2014. A tax filer may be an individual or may represent a whole family, so the number of people affected by the penalty is likely higher. But it is still a fraction of the approximately 29 million Americans who did not have insurance that year.
Preliminary estimates show that filers paying the penalty continued to decrease in 2016 and 2017, potentially a combination of more people getting insurance and more submitting “silent returns” — leaving blank whether they had health care coverage that year.
In many cases, places with the highest rates of uninsured people, like Texas, have the highest share of people who pay the penalty for not obtaining insurance.
States in orange did not expand Medicaid as of 2015
States in orange did not expand Medicaid as of 2015
Note: Alaska, Louisiana, and Montana have expanded their Medicaid programs since the beginning of 2015, and Maine voters approved an expansion this month. | Sources: Kaiser Family Foundation (uninsured populations 18-64); Internal Revenue Service (2015 data)
Several other factors also contribute to the variation in penalty payments among states. People who have income below a certain threshold or would be eligible for Medicaid if their state had expanded its program are exempt from the penalty, as are some immigrants, people who are incarcerated and people who use religious health care sharing ministries.
There are many other possible exemptions, including for financial or personal hardship. More than 12 million tax filers claimed an exemption for 2015.
Some states and nonprofits in certain areas are more active in helping people sign up for health insurance and educating them on exemptions they may qualify for. Conversely, high levels of political opposition to the health care bill in certain areas could contribute to higher shares of people choosing to pay the penalty.
Percentage of Tax Returns Paying A.C.A. Penalty in 2015, By Income Group
$75,000 to $100,000
$100,000 to $200,000
The $25,000 to $50,000 income group had the highest share of people paying the penalty in 2015, and several Republican senators have cited similar statistics to promote the repeal of the mandate. This income group is less likely than higher earners to get health insurance through work, and many do not qualify for an exemption based on affordability because they would be eligible for premium subsidies reducing the cost.
According to a recent poll by the Kaiser Family Foundation, 37 percent of the uninsured said that the reason they do not have insurance was because they could not afford it.
The Main Reason People Do Not Have Health Insurance
Too expensive or
Too expensive or
Don’t need or want
Source: Kaiser Family Foundation | Among uninsured people 18-64.Experts say that many of the tax filers in the lowest income bracket who paid the penalty may have been eligible for an exemption. Taxpayers earning less than the federal income tax filing threshold, which was $10,300 for a single person and $20,600 for a married couple in 2015, are exempt from the penalty.
Taxpayers also qualify for an exemption from the penalty if the lowest-priced qualifying coverage costs more than roughly 8 percent of their income. In 2015 and early 2016, the Internal Revenue Service sent letters to almost 319,000 taxpayers who may have unnecessarily paid the penalty to help them amend their 2014 taxes.
The penalty for not having health insurance is calculated based on income and the average cost of health care premiums. In 2015, the minimum payment was $325 for a single adult, and the maximum was $2,676 for a single adult and $13,380 for a family of five. The maximum is based on the annual national-average premium for a bronze-level health plan.
Since then, the minimum has more than doubled, and the maximum has slightly increased, bringing the average penalty to $708 in 2017, according to preliminary data.
Average A.C.A. Penalty in 2015
Many taxpayers choose to pay the penalty because they calculate it will cost less than insurance. But a recent report by the Kaiser Family Foundation found that 54 percent of uninsured individuals would be better off purchasing a bronze-level health plan than remaining uninsured.
If the Senate and House pass a tax bill that includes the mandate repeal, those who do not purchase health insurance will no longer have to pay the penalty, and an estimated $338 billion would be saved to pay for tax cuts. The savings would come from fewer people claiming federal insurance subsidies or Medicaid benefits.
But experts warn of several negative consequences of a repeal. A Congressional Budget Office report estimated that 13 million fewer people would have health insurance by 2027 — some because there would be no penalty for dropping their coverage, and some because average premiums would become unaffordable as healthier people exit the markets.
There is some evidence that more people than projected would still choose to purchase insurance without the mandate, and the budget office plans to update its estimates next year. But the report’s authors emphasized that at the least, the repeal would create billions in savings and millions more in uninsured people.
“Despite the uncertainty, some effects of this policy are clear,” the authors wrote.
Additional sources: Kaiser Family Foundation; Tax Foundation; Tax Policy Center; Urban Institute
