ObamaCare Penalty Could be too Low, Analysis Finds

A new analysis highlights that it is often cheaper for people to pay ObamaCare’s penalty for not having health insurance than to buy coverage, meaning the penalty might be too low to spur middle-income people to get covered.

The analysis from the consulting firm Avalere Health finds that for people making less than 200 percent of the poverty line, or about $23,000, purchasing insurance is usually cheaper because of income-based subsidies under the law.

The penalty for not having health insurance in 2015 is $325 or 2 percent of income, whichever is greater.

But for healthy middle-income people, for whom the subsidies are lower, paying the penalty and forgoing insurance is often cheaper, it finds.

So, the analysis notes, the penalty could fail to push people to buy insurance. It found the special ObamaCare sign-up period for people who discovered the mandate penalty while filing their taxes has so far signed up a “lackluster” 68,000 people. Up to 6 million people are estimated to owe the penalty.

In the same vein, previous data from Avalere showed much higher sign-up rates for lower-income people. HealthCare.gov signed up 76 percent of people with incomes from 100 percent to 150 percent of the poverty line. But for people with incomes from 300 percent to 400 percent, only 16 percent signed up, even though they are still eligible for a subsidy.

The analysis released Friday provides the example of a 27-year-old with income at 300 percent of the poverty level. That person would pay around $2,000 for the lowest-cost subsidized insurance, compared with a penalty of just $345.

“Individuals earning more than double the poverty level may continue to forgo coverage since paying the fine is still much more affordable than purchasing insurance,” said Caroline Pearson, senior vice president at Avalere.

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