Analysis Finds Individual Mandate Penalty Might Be Too Low

It often is less costly to pay the penalty for not having health insurance under the Affordable Care Act's individual mandate than to purchase coverage, which means the penalty might not be high enough to encourage middle-income residents to purchase coverage, according to an Avalere analysis released Friday, The Hill reports.

About six million residents are thought to face the individual mandate penalty. In 2015, the penalty for remaining uncovered is 2% of income or $325, whichever amount is larger.

Analysis Findings

The analysis found that for residents with incomes under 200% of the federal poverty line -- or an annual income of about $23,000 -- purchasing coverage is typically less costly than facing the penalty because of subsidies to offset the cost of insurance.

However, for healthy, middle-income U.S. residents, subsidies are smaller, therefore making it less costly to pay the penalty than to purchase coverage, according to the analysis. The analysis gave an example of a U.S. resident age 27 with an income at 300% of poverty level, who would pay $2,000 for the lowest-cost subsidized plan or $345 to forgo coverage.

Avalere Senior Vice President Caroline Pearson said, "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" (Sullivan, The Hill, 4/24).