With tax season looming and folks wondering just what this "ObamaCare" stuff is really all about, it may be time to take a sobering step back and figure out what it all means.
On March 23, 2010 President Barack Obama first signed into law The Patient Protection and Affordable Care Act, the so-called ObamaCare. With the third anniversary of the law's passage upon us, is it truly up there in the ranks with past medical coverage overhauls like 1965's Medicare/Medicaid ... or is it just more claptrap that continues to pass the hot potato of increasingly onerous medical insurance/services costs?
ObamaCare was created with the intent of ultimately lowering the price of health care in the U.S. while simultaneously decreasing the number of uninsured Americans. Overall improvements to healthcare are a part of ObamaCare's mandate.
Perhaps the biggest positive effect of ObamaCare is that it requires health insurance companies to cover all of us and to offer us the same rates (according to certain factors like age and geographical location), no matter what our pre-existing conditions might be (including things like tobacco use).
That's really good news for those of us such as freelancers and other members of that little class called "working" who might be killing themselves at three small jobs without any benefits: all who find themselves uninsured most of the time.
This means if we, say, break a leg, we can actually get medical insurance. Again, this is a good thing about ObamaCare. But, as "they" say (and they're usually right): There's no such thing as a free lunch (or, in this case, medical coverage).
As you probably have already heard or read, the not-so-good part of ObamaCare is its requirement that all of us must have medical insurance coverage or else face penalties at tax time.
Some exemptions include religious affiliations (separation of church and state be damned here, we suppose?) and financial hardship. But, essentially, if you don't get yourself some medical insurance, you'll face extra taxes over the next three years and beyond.
This insurance requirement is enraging many people who don't understand how the government can more or less force anyone to have medical insurance. What's next, after all? Cellphones? TVs? Cars? This could definitely be seen as a dangerous precedent, some believe.
But beyond the slippery slope of ObamaCare's insurance requirement are the penalties themselves. How much will they cost those of us who are rarely W-2 full-timers or just simply can't afford medical insurance most of the time, for whatever reason?
Don't worry too much, yet, as the requirement/penalties clause of ObamaCare is being phased in from 2014 to 2016. This means you won't have to concern yourself with it this year (even if you haven't already done your taxes). But, come 2014, you'll be seeing a whole new series of questions about your medical insurance coverage in your tax paperwork, and this is when penalties will start coming into play.
The first year (2014, meaning your taxes for 2013) will see penalties for those without medical insurance at a rate so low that it will actually likely cost you less than it would to get individual coverage. According to FactCheck.org, we're talking somewhere in the ballpark of $95 (minimum; it will change for each person according to personal income).
In 2015, the penalty will go up significantly, to $325 (again, a number that may be modified according to income). It's in 2016 that things will start getting really expensive for those of us without medical insurance. We're talking $695 per person (with a $2,085 per family cap, which can of course be modified once more in accordance with income).
Considering the average individual medical insurance plan will cost you something in the range of $2,196 per year ($183 per month), according to eHealthInsurance, even $695 per year isn't so bad. In comparison, that is.
When the Supreme Court ruled that ObamaCare can work as a "a tax that is within the power of Congress to impose," Chief Justice John Roberts referred in his opinion to the fact that "[F]or most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more."
But, remember: That $695 per year represents nearly $60 per month. Just for not having medical insurance that you might not be able to afford. That $60 a month might not be a lot to a Chief Justice, but for us plebeians already living on a razor-thin budget, even an extra $20 a month can make or break us.
Lest we also forget that starting in 2017, the $695 penalty will go up further, with inflation.
"The tax would be more for persons with higher taxable incomes," FactCheck.org says. "When phased in, it will be 2.5 percent of household income that exceeds the income threshold for filing a tax return."
"For 2011, those thresholds were $9,500 for a single person under age 65, and $19,000 for a married person filing jointly with a spouse. So, to give a rough calculation, a couple with $100,000 of income might pay a tax of $2,025 if they choose to go without coverage."
Basically, if you make less than $9,500 a year as a single person or $19,000 a year as a married person filing jointly with your spouse, you won't be penalized. Although, if you can live off that much money per year, we tip our hats to you for figuring that one out.
You will also be able to "pro-rate" your penalty/tax, depending on how many months out of the year you are or are not covered.
The penalty will be collected by the IRS (hence why the Chief Justice cites it as a "tax" of sorts).
From there, it's all about paying for Obama's health care overhaul that will allow us some of those things like insurance companies having to take us regardless of our pre-conditions. The law also grants subsidies to low-income families and individuals based on a sliding scale, should they decide to purchase insurance via an exchange.
Subsidies are being granted, too, to small businesses in order to help offset costs for insuring its employees if it purchases insurance via an exchange. Medicaid eligibility has been expanded, as well. Co-payments, deductibles and co-insurance will be eliminated altogether from select health care benefits, too.
"The money to pay for ObamaCare's healthcare overhaul, which will be in excess of $1 trillion and probably upwards of $2.5 trillion from 2014 to 2023, has to come from somewhere," Forbes says. "In the New Year, Americans will find that 'somewhere' is their wallets."
Whether we should or should not be paying a tax/penalty for not having medical insurance, though, is beside the point. It's happening, and all of us — aside from those exempted (those who fall below the threshold mentioned previously, those who are employed by a firm nice enough to give them benefits but who still can't afford the coverage the employer offers — meaning more than eight percent his/her household income, Indian tribes, et al) — will have to figure out whether we want to pay now or later.
But, maybe not.
"The law prohibits the IRS from seeking to put anybody in jail or seizing their property for simple refusal to pay the tax," FactCheck.org says.
If you refuse to pay the penalty/tax, the ObamaCare laws make it clear you "shall not be subject to any criminal prosecution or penalty," by the IRS collectors. The IRS also cannot file a lien ("a legal claim against such things as homes, cars, wages and bank accounts") or levy ("seizure of property or bank accounts") on you for refusing to pay.
"The law says that the IRS will collect the tax 'in the same manner as an assessable penalty under subchapter B of chapter 68 of the tax code," FactCheck.org says. "That part of the tax code provides for imposing an additional penalty 'equal to the total amount of the tax evaded, or not collected.' It also requires written notices to the taxpayer, and provides for court proceedings."
This means that though the IRS can't do much to those who refuse to pay, it can sue those who refuse for twice the amount owed. At this time, though, there's no more details available about how exactly the IRS would go about doing this.
What do you think about all of this ObamaCare overhaul? Is this fair? A lifesaver? A life-ruiner? Are you going to refuse to pay? Let us know in the comments below.
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