We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
This year, an uninsured Colorado family of four would pay a maximum fee of $285 or 1 percent of income, whichever is greater. The penalties escalate dramatically in subsequent years, topping out in 2017, when that same family would pay a maximum fee of more than $2,000 or 2.5 percent of income.
With the closure March 31 of the sign-up period for the new health insurance exchange, officials now are examining how many people failed to enroll and how many will pay the required fines under the new law.
Those who remain uninsured will be subject to penalties unless they qualify for one of several exemptions under the ACA. The penalties will be enforced when taxpayers file their 2014 taxes at the beginning of 2015, according to a spokesperson from the Internal Revenue Service.
The penalties will grow each year until 2017, after which they will be adjusted for inflation annually, according to the IRS.
Initially, the law imposes a flat fine of $95 per adult in a family, plus another $47.50 for each child under the age of 18, with a maximum charge of $285 per family for those earning up to $29,000 annually.
Those earning more than $29,000 will pay a penalty of 1 percent of annual household income for all incomes above the tax filing threshold of $10,150 per year for an individual. Whichever penalty is greater will apply.
For 2015, the penalty will increase to $325 per adult and $162.50 per child under the age of 18, or 2 percent of annual household income, and in 2016 will increase again to $695 per adult and $347.50 per child under age 18, or 2.5 percent of annual household income, according to Healthcare.gov.
That means that when filing their 2016 taxes at the beginning of 2017, an uninsured family of four, with two children under 18, would pay $2,085, or 2.5 percent of their household income, whichever is greater, to the federal government. The median household income in Colorado is $58,244, which would amount to a penalty of $1,456.
By comparison, a 2013 study by the Kaiser Family Foundation showed that an average family pays $4,565 annually for health-insurance premiums. This number is likely to change in 2014 since about 124,000 people bought a plan through the state’s health-care exchange, Connect for Health Colorado, and about half of those received a tax credit that will bring down premium costs.
Estimates by the Colorado Health Institute show that by 2016, about 6.4 percent of Larimer County, 7.4 percent of Weld County, 6.6 percent of Boulder County and 4.7 percent of Broomfield County would be uninsured, although not all of them will be subject to the penalty.
Pinning down just how many people in Colorado are without insurance is difficult, because it is unclear how many of those who enrolled via the exchange or Medicaid expansion did not have insurance before the Affordable Care Act.
More than 283,000 Coloradans accessed coverage via Connect for Health Colorado or the Medicaid expansion, but because those who enrolled were not required to answer a question about their previous coverage status, there is no data on how many enrollees were previously uninsured.
Before the exchange opened in October, there were about 640,000 working-age Coloradans without health insurance, according to the 2013 Colorado Health Access Survey, performed by the Colorado Health Institute. That works out to about 19.6 percent of the population uninsured.
A national survey by the Urban Institute and the Robert Wood Johnson Foundation showed that in states that expanded Medicaid, the number of uninsured dropped by four percentage points. Applying this to Colorado, the Colorado Health Institute estimates that about 130,600 working-age adults are newly covered following the implementation of Affordable Care Act programs, while an estimated 509,400 remain uninsured.
Not all of those people are subject to the penalty, said Jeff Bontrager, director of research on coverage and access for the Colorado Health Institute.
Several populations, including Native Americans, undocumented immigrants, those who are incarcerated and those who do not make enough money to be required to pay taxes are all exempt from the penalties.
Estimates made by an economist hired by Connect for Health Colorado in 2012 show that 78 percent of those who remain uninsured after the Affordable Care Act rollout in Colorado would not be subject to the penalty because of various exemptions.
The remaining estimated 22 percent who choose to go without insurance would be subject to the penalty, according to the projections.
One reason for including the penalties in the Affordable Care Act was to motivate younger, healthier populations who might not get insurance otherwise to buy a health plan, according to Marc Reece, associate director of Colorado Association of Health Plans.
Because the Affordable Care Act makes it illegal for insurance carriers to turn people away because of pre-existing conditions, it is important for young, healthy populations to enroll in coverage, either on the exchange or off, to subsidize the costs of more illness-prone consumers.
But since paying the penalty is less expensive than an insurance premium in many cases, some consumers will continue to go without insurance, especially those young adults who have yet to start a family or begin acquiring assets, Reece said.
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Molly Armbrister can be reached at 970-232-3129 or email@example.com. Follow her on Twitter at @marmbristerBW.