Some consumers are willing to pay the penalty for not having health insurance because it is cheaper than getting coverage, according to a new analysis.
The analysis from research firm Avalere Health details one reason why the administration has done so poorly in a special enrollment period for Obamacare. So far only 68,000 people have signed up for the period that ends April 30.
This is the period set aside for people who are getting hit by the law’s new tax on Americans who do not have health insurance packages. Affected taxpayers must still pay the 2014 penalty but could avoid the higher 2015 penalty by getting coverage by the deadline.
But it turns out many uninsured workers would rather pay the tax, because it will cost less than buying insurance.
The 2014 penalty is $95 or 1 percent of household income, whichever amount is highest. The penalty bumps up to $325 or 2 percent in 2015 and goes up to more than $600 in 2016.
But some people would still pay more for health coverage than the penalty, especially those who earn higher incomes.
For instance, a 27-year-old making about $23,000 in 2014 would pay $849 a year on health insurance after taking into account subsidies. That person’s Obamacare tax would be only $230, however — a difference of $619, or nearly 3 percent of the worker’s annual income.
Even in 2015 the 27-year-old would avoid $391 in additional costs by going without insurance and paying the penalty.
“While the incremental cost of insurance becomes less significant as the mandate penalty grows, individuals earning more than double the poverty level may continue to forego coverage since paying the fine is still more affordable,” said Caroline Pearson, Avalere senior vice president.
Avalere already reported that a majority of Obamacare enrollees are low-income, which could impact future enrollment gains.
