Trump Didn't Kill the Obamacare Penalty. Where Does That Leave the Uninsured?

Trump Didn't Kill the Obamacare Penalty. Where Does That Leave the Uninsured?
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President Trump and Congressional Republicans have tried to kill the Affordable Care Act more than once this year. But the legislation, also known as Obamacare, is still the law of the land despite their best efforts.

This means that you’ll still have to pay a penalty when you file your income taxes next April if you don't have health insurance coverage throughout 2017.

Hector De La Torre, executive director of the Transamerica Center for Health Studies, says consumers still need to pay attention to the tax-filing regulations of Obamacare, at least until — or if — Congress manages to kill it.

"The Affordable Care Act is still current law as of today," De La Torre says. "Unless Congress approves changes and the president signs that legislation, the mandate is in effect. The president's recent executive orders direct governmental agencies to draft new regulations. However, those have not yet been drafted, and that process takes months."

There is one significant change, though, from last year. You no longer have to answer questions about your health coverage on your tax return.

In the past, the IRS would not accept any tax return that didn’t provide health insurance information. The 2017 tax return, though, will allow you to not disclose if you lacked health insurance.

Individual mandate of Obamacare

One of the more controversial elements of Obamacare, and one that Trump and his fellow Republicans have criticized, is the requirement that individuals must buy health insurance or pay a penalty when they file their taxes. This individual mandate is necessary, though, for Obamacare to work. When healthy individuals buy health insurance, it spreads out the risk that insurers face and helps keep premiums affordable.

The challenge, though, is that Obamacare premiums, which already rose in 2017, might not be so affordable to everyone next year.

That’s because premiums are expected to rise again in 2018. Health care consulting firm Avalere studied initial rate projections from eight states and found that the premiums for "silver" plans, which are the program's most popular, are expected to jump 18 percent in 2018. That comes after the premiums for those plans increased 12 percent in 2017.

Some states might see especially steep increases. According to an October, 2017, story by New York Magazine, consumers who take out individual insurance through Obamacare in Florida could see an average premium increase of 45 percent. In Georgia, according to the same story, premium hikes might soar to 50 percent.

Consumers might also have limited options when it comes to Obamacare. Avalere says that 41 percent of U.S. counties are expected to offer just one insurer on the Obamacare marketplace in 2018.

How much is the Obamacare penalty?

U.S. residents who can afford health insurance and don’t sign up for a policy will face a penalty of either $695 per adult plus $347.50 for every child or 2.5 percent of your household income minus the amount of the minimum filing threshold, the lowest income at which you need to file taxes, whichever amount is higher.

The highest you can pay in penalties, though, is $2,085, which is equal to the average annual premium for a “bronze” level health insurance plan sold on the Affordable Care Act marketplace.

Steven Cruz, president of Resuelve, Inc., a consulting firm based in Washington, D.C., says that these penalties can make a significant dent in the yearly incomes of some taxpayers.

"The basic fact is that there will be a high cost to gaps in insurance that folks need to be prepared to face," Cruz says.

How much you’ll pay depends on your family and your income. First, figure out the flat dollar amount. If you and your spouse don’t have health insurance this year, you’d pay $1,390 in combined penalties on tax day in 2018. If you have children who are also uninsured, that fee would be higher. Say you have one children, the fee for all three residents of your household would be $1,737.50.

Next, determine how much you’d have to pay using the income formula. Take your household income minus the minimum filing threshold amount for the year, the income above which the IRS requires you to file income taxes. The most recent number available is $10,350 for a single person under the age of 65 and $20,700 for a married couple filing jointly. Calculate 2.5 percent of that number to get a total that you’ll have to pay in penalties.

Finally, compare your flat dollar total to your income formula total. The larger number is your Obamacare penalty.

Calculating the penalty can get more complicated depending on whether you didn't have health insurance for only a portion of the year. If you were without health insurance for only one or two months, you won't have to pay any penalty. But if you lacked coverage for more than two months in a row, you will face a penalty.

If you had insurance for some of the year, you'll pay your penalty on a pro-rated basis for the months in which you didn't have health insurance.

To figure your penalty in this case, take the total penalty amount you'd owe for the year if you had no insurance at all. Divide that number by 12. Then multiply that amount by the number of months you weren't covered.

And remember this: If you had insurance for even one day in a month, the federal government will consider you covered for that entire month.

Exemptions to avoid penalty

In more good news, you might not have to pay your Obamacare penalty even if you did go without health insurance for party of the year. That’s because there are some exemptions to the penalty.

The most recent Transamerica Center for Health Studies survey found that 12 percent of Americans are uninsured and might be subject to the tax penalty. However, many uninsured might not have to pay these penalties based on their income levels or other circumstances.

De La Torre said that for the 2015 tax year, about 6.5 million U.S. taxpayers reported a total of $3 billion in tax penalty payments. But about 12.7 million taxpayers who didn’t have insurance didn’t pay penalties because they claimed exemptions.

Exemptions include the affordability exemption. You can qualify for this break if the least expensive health insurance plan available to you would cost more than 8.13 percent of your household income or if your income is so low that you don’t have to file income taxes.

There’s also a hardship exemption. You can qualify for this if you were evicted from your home, had a death in the family or you received a shut-off notice from a utility. You might also qualify if you filed for bankruptcy, fell into deep medical debt or faced other qualifying problems.

You can discover if you qualify for a healthcare exemption by logging onto Obamacare’s exemption screening page.

If you want to avoid penalties, you will need to enroll in a marketplace health insurance plan. Open enrollment for 2018 runs Nov. 1 to Dec. 15 of 2017. This is a shorter time period than last year, when open enrollment lasted three months.

You can find more information about open enrollment and Affordable Care Act plans at, your state exchange website, or

The bottom line? The Obamacare penalties probably aren’t going anywhere before 2018 tax day arrives.

“Taxpayers should continue to file their tax returns as they normally would,” says Joshua Zimmelman, president of Westwood Tax & Consulting in Rockville Centre, New York. “The new administration has softened the reporting requirements back to what they were in earlier years of the ACA, but that does not change anything for consumers. You still need to have health insurance or you run the risk of being charged a penalty fee.”

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Laura Adams is a personal finance expert, award-winning author, host of the top-rated Money Girl Podcast, and insuranceQuotes’ senior analyst. Join a growing group of thousands who are taking their finances to the next level in her free Dominate Your Dollars private Facebook group.

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