Health Care 'Tax' Would Average $1,000 A Year, Though Few Americans Will Pay

It's a mandate, it's a penalty -- no, wait, it's a tax.

In upholding the constitutionality of the Affordable Care Act as a tax, the Supreme Court on Thursday framed how the giant health care law is likely to be characterized throughout the 2012 election.

So how much will the mandate cost the uninsured and who will be forced to pay? We looked at estimates provided by the Congressional Budget Office for 2016, when the penalties will be in full effect.

The short answer, for readers allergic to lots of numbers: not many people. In 2010, the CBO estimated that about 4 million Americans would be subject to a penalty or a tax. That's about how many Filipino-Americans there are or residents of Los Angeles. The average tax penalty will be $1,000 per year.

So who won't be paying a penalty in 2016? The biggest group will be the 159 million people who receive health insurance through an employer. Next in the lineup will be the 49 million Americans whose insurance will be paid by Medicaid (including 15 million new enrollees as a result of the new law) and the 28 million people who will buy health insurance on the private market (an uptick from the 25 million today). Another 20 million taxpayers will buy insurance on the new exchanges, according to the CBO. (Here's a nifty graphic from The New York Times showing projections for 2020.)

According to the CBO's most recent estimates, that leaves 26 million Americans in 2016 who will be uninsured and thus possibly liable for paying a penalty. But there are exemptions -- lots and lots of them. American Indians will be exempt, as will be prisoners and illegal immigrants. So, too, will be people opposed for religious reasons. Workers with an income low enough that they don't have to file a tax return will be exempt as will be anyone whose premium would exceed a specific share of their income -- initially 8 percent.

Collections from penalties will total about $4 billion a year, according to the CBO. The penalty in 2016 will be a flat $695 or 2.5 percent of household income, whichever is higher.

Wealthier people who forgo insurance will pay the most. Households with an income above 400 percent of the poverty level, currently about $96,000, will have to chip in 66 percent of the total penalty amount, according to the CBO. A family would not be required to pay more than $2,085, regardless of the circumstances.

There are two important qualifiers to this analysis: The CBO's estimates of how many taxpayers will pay a penalty was based on a 2010 estimate that 21 million Americans in 2016 won't have insurance. A more recent estimate, from earlier this year, projected that 26 million taxpayers won't have insurance but did not calculate the expected penalties or how many would pay one. The difference could skew the numbers, with the most likely result that the estimate of 4 million penalty payers by 2016 is a little low.

The Supreme Court also ruled that states can opt out without risk of losing federal support for Medicaid; this means that some may do so, thus lowering the number of new Medicaid enrollees. It isn't clear how or whether that might influence how many individuals will have to pay the penalty. The CBO website noted on Thursday that the agency is evaluating the impact of the Supreme Court's decision.

This story has been updated with details about states' opt-out option.