Among the least popular parts of the Affordable Care Act has been the requirement that most Americans get health insurance coverage or risk facing a hefty tax penalty.

But while health policy experts say the penalty is a critical tool that has helped reduce the number of people without insurance, others worry that it’s straining some households that are already pressed financially.

After the close of the third open enrollment period for HealthCare.gov, 12.7 million Americans signed up for coverage through the government’s health insurance marketplace. That number included more than 290,000 Missourians — an increase of 78,000 compared to 2015.

Many of those enrollees were new to the marketplace. And many were young, a coveted demographic, federal officials said during a conference call in early February.

What drove more consumers to sign up for insurance coverage this year? Reminding them about the tax penalty was a factor, Kevin Counihan, CEO of HealthCare.gov, said during the call.

“Reminders sent at the right moment proved powerful,” Counihan said. “It worked. It got more consumers covered.”

Emily Bremer, an insurance broker in Clayton, agrees: Consumers were, in fact, motivated by the tax penalty.

“I had quite a few people say to me this year that having to pay the penalty in 2015 when they did their 2014 taxes was a bit of an eye-opener,” she said.

The fine for not having coverage in 2015 is 2 percent of adjusted household income or $325 per adult and $162.50 for children under 18, whichever is greater.

Next year, the fine for not having coverage rises to 2.5 percent of household income or $695 per adult and $347.50 per child, whichever is greater.

“I think it will increasingly catch people’s attention going forward,” said Tim Jost, a law professor at Washington and Lee University and a health law expert.

“It’s going to make much more of an impression on people once they realize that that refund I was counting on to catch up on my car payments is not coming, and I may owe some money to the IRS,” he said.

Still, many Americans are unaware of the tax penalty, health policy experts say.

In 2014, about 7.9 million taxpayers were hit with the penalty for not having insurance. But another 12.4 million taxpayers successfully claimed an exemption and avoided the fine.

One of the most common ways taxpayers avoided the fine, the IRS said in an October 2015 report to Congress, was by simply demonstrating they couldn’t afford health insurance.

Under the Affordable Care Act, coverage is deemed unaffordable if premiums exceeded 8.05 percent of household income.

Despite that exemption, Bremer says there are people who may have qualified for some financial assistance on the marketplace but still would have struggled to pay for coverage.

“The people who seem like they get the best deal are the people who are very, very low-income,” Bremer said. “It’s the people in the upper range who are having the hardest struggle.”

She’s talking about the upper range of the sliding scale of financial assistance given to consumers who shop on HealthCare.gov.

Consumers are eligible for financial assistance between 100 percent and 400 percent of the federal poverty level.

An individual in Missouri making between $11,880 and $47,520 currently qualifies for help purchasing coverage. Individuals making closer to $11,880 receive more help than the folks making closer to $47,520.

But it’s the individuals making 300 percent to 400 percent of the federal poverty level, or individuals making between $35,000 and $47,520, who seem to be struggling, Bremer said.

Those individuals — the ones who don’t qualify for as much government assistance — don’t appear to be getting coverage to the same degree as others, said Linda Blumberg, a health care economist with the Urban Institute.

“There is a lower take-up in that income group because the assistance is much smaller,” she said.

And despite the fact those individuals have lower incomes and could have qualified for some assistance, they won’t be able to avoid the tax penalty — because they could have qualified for assistance that would have made insurance “affordable” under Affordable Care Act.

“There will be some people for whom health insurance would have been affordable using tax credits but didn’t take advantage and will be subject to the penalty,” Jost said.

But Blumberg said it’s important to think big picture about the individual mandate.

“Without the individual mandate, the expansion of coverage would be much smaller, the average premiums would be significantly higher, and that (would mean) more federal spending per person assisted,” she said.

Source:  St. Louis Post-Dispatch