Obamacare: Should I Take the Penalty Instead of Purchasing Health Insurance?

Health Care PenaltyA big part of the Affordable Care Act, commonly know as Obamacare, starts on January 1, 2014, and it requires everyone to have health insurance unless you meet one of a few exceptions. If you choose not to have health insurance, you will be subject to a tax penalty. If you don’t already have health insurance, could it make financial sense to take the penalty instead of purchasing a policy?

 

Saving Money By Not Buying Insurance

Let’s look at it from a purely financial standpoint. I will use a friend of mine as an example. We’ll call her Irene. Irene doesn’t have health insurance and has a decent job at a small business that doesn’t offer a group policy. Because her employer only has a few employees, they are not required to offer insurance under the Affordable Care Act. Her husband and step-daughter have coverage through his job.

Irene has no coverage for herself and her daughter, and they don’t qualify for state aid. For the two of them, it will be around $250 per month.She is a smoker and has a higher rate due to that status. The penalty for not getting insurance is $95 per adult or 1% of your income, whichever is greater. For uninsured children, the penalty is $47.50. In her case, the penalty would be around $300 per year. Financially, it would seem that $300 a year in penalties would be a much better plan than paying $3000 per year for insurance that still has deductibles and copays.

Because I like to play devil’s advocate, I asked Irene what would happen if she gets into a catastrophic accident on the way home. She says she has a savings account for medical expenses. “What if you have to be in the ICU or have surgery?” She said that she would qualify for CICP, which is the Colorado Indigent Care Program. It is a state program that covers emergency treatment and hospitalizations required to save your life if you are uninsured. I believe it covers more in some areas, but where we live, the hospital and sliding scale clinic are the only ones who accept it. It does not cover medicines, therapy, or surgeries that are non- emergent. I am also unsure what allows you to qualify, but she seemed pretty sure she would.  It sounds like she has it all planned out and is, in fact, saving money.

While that might seem well and good, let me also share a couple of stories from the last few months. Small towns are great for that!

Cost of a Brain Injury?

There was a lady we’ll call Marla who attended my morning exercise class for a while. I won’t say we were friends, but at 5:30 AM, you tend to bond a little bit. She was 51, in great shape, and looked years younger. Marla was several times divorced, had a new Harley Davidson, and liked to party. While I thought she maybe hung out at the bar a little much, who am I to judge? I’m a boring optometrist. Carpe Diem, right?

Well, Marla decided to let her new boyfriend, who didn’t have a motorcycle endorsement on his license, drive her around on the Harley. They hit a deer at 45 mph, without helmets. He walked away with scratches. Marla ended up with a severe head injury and a broken pelvis. She was flown out on a helicopter because our local hospital didn’t have the specialists she needed.

After surgeries to put her back together, she miraculously woke up, but obviously needs months of therapy for learning to walk and recover from her brain injury. Did I mention that Marla doesn’t have health insurance?

Guess what happens if you don’t have health insurance and need long term care? You get discharged and sent home. I have no idea if Marla will make a full recovery, but if she doesn’t, I will always wonder if it would have made a difference if she could have stayed in rehab.

Can You Afford Cancer Treatment?

My last story is one from a young patient we’ll call Hope. I have heard just about everything over the  years, so it is rare that I  get choked up during an exam, but I almost lost it on this one. Hope was 27 and came in for a regular eye exam, but I noticed she had marked cancer on her history form. Sometimes people get confused and mark family history as their own, so I asked about it.

Hope was first diagnosed with metastatic melanoma at age 15. It appeared as what she and her parents thought was a cyst on her shoulder. It was not a cyst. She beat it that time, but it came back at age 23 and spread to her brain and lungs. She tried all the traditional therapies and was losing. She got accepted into a hospital in Houston for a new program of therapy,which her insurance approved. Everyone else in the group died except Hope. She has been cancer free for four years. I wonder what would have happened to Hope if she hadn’t had insurance.

The Penalty Could Cost More Than You Think

No one thinks they are going to get cancer at age 15. No one believes they are going to get into an accident on a Sunday joy ride. Bad things happen to good people. When your time is up, it’s up, but what if by some miracle, you do survive something that should have killed you? Do you want the absolute best care, or do you want the minimally necessary standard treatment approved by a state indigent program?

Maybe you can save money by choosing not to get health insurance. It might seem like a good idea to take the penalty instead, but please remember Marla and Hope and the thousands of others like them who leave home happy and care free and come home fighting for their lives.

Health care in the US is a mess. We have some of the best and most advanced therapies and providers, but we don’t always have a way to access them. The system is broken, and it won’t be fixed tomorrow. I do think all people need at least major medical health insurance so that if the need arises, you can concentrate on getting well rather than how to pay the doctor bill. You really can’t afford not to be covered.

Obviously you get my take on the issue, but what about you? Will you purchase health insurance or take the penalty?

Image: Freedigitalphotos.net/krisnan

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Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of Snipon.com.

40 Comments

  1. Those are some seriously scary stories. I can’t pretend to understand the US system, but from an outsider’s view, it looks like a total clusterf-. I met a couple of Americans recently who didn’t have health insurance and seemed pretty blase about it, surprisingly – the gist I got from them (accurate? I don’t know) was that you would not be denied care if you needed it, even if you were uninsured – and that some of their friends would sometimes say they were uninsured, even if they had insurance, because it would save them money. *head spins*

    1. Hospitals by law cannot deny you care even if you don’t have insurance. That does not mean they won’t bill you–full price, too, not the negotiated discounts insurance companies get. Financial social workers might help you get on Medicaid or some other assistance program, otherwise–well, that’s why America has the highest personal bankruptcy rate in the world!

      1. Right, they have to save your life, but if you need physical therapy or a bed a rehab facility, you’re out of luck. I’m sure the lady in my example will eventually get on disability and/or Medicaid, but I don’t think they cover any sort of therapy she needs. If they do, it’s hard to find providers who accept it. We see that with eye conditions all the time. If you have Medicaid and need a corneal transplant, it isn’t going to happen in Colorado.

    2. Hospitals cannot refuse care to save your life, but they can charge you the entire bill if you don’t have insurance. They also won’t let you have non-emergency surgery if you can’t pay. I’ve seen people not be able to get cataract surgery without paying up front. At our local hospital, you get a 30% discount for paying all at once with cash or a check if you don’t have insurance, so that might be why people say they don’t. I have actually elected not to have my insurance billed to take the discount.

  2. $250 seems really low for a woman who smokes and a daughter. It’s probably a lot more than that. I pay just about that amount for just me and I’m healthy with no history of medical issues That being said EVERYONE should do their damnedest to get health insurance. Unless this woman is hoarding millions for “emergencies” then it could send her into bankruptcy if any of the above situations (or many others) happen. Heck I have have my own insurance but the deductible is so high and if some kind of long term health care happened I’m sure they would raise my premium so high I could barely afford. it. It will be interesting to see how all of this shakes out over the coming years.

    1. My daughter and I pay $190 per month, but we have a $10K deductible, but $10K isn’t going to bankrupt me like having a major hospital stay might without insurance. I don’t see it getting any better any time soon.

  3. Absolutely everyone should have health insurance, and it’s an on-going shame that it’s unaffordable for so many. I’m semi-retired and have had an individual plan for years (I do without dental and vision coverage). My premiums have gone up 85% in the last two years, and will increase even more in 2014. I will not qualify (barely) for a subsidy on the health exchange, but using my state’s (Wash.) premium calculator, my family’s premiums will be alsmost 3X what they are now!! That will be just over 22% of our income. That’s just an estimate until the exchanges publish the actual plans/costs later this summer, but I am waiting with some anxiety. I’m not sure what I will do. And I have been working with health insurance companies for 30 years and thought I knew it all. How will the average person cope?

      1. The people right in the cusp of qualifying are the ones that suffer the most in any government run program. I truly feel for you..been in a similar situation myself before although not with health care.

  4. We will continue to pay for health insurance. Health insurance is there to protect us from the catastrophic losses that could ruin our financial future. As you showed, those can come at any time.

    1. I would cut my electricity before I cut health insurance. It’s that important to me, even if it will only kick in for catastrophies and I hope I never have to use it.

  5. We have private health insurance because the government taxes you a certain percentage of your total income if you don’t have it. It is a little annoying to be forced into private health cover, but the flip side is that I like the security of knowing many health issues are covered for us.

    1. Once when were were going over our home owner’s insurance with an agent, I thought the replacement cost was a bit high. The agent said she gets that alot, but if the house burned down, we’d wish we had in insured for $1 million. I think that’s the same for health insurance. If you need it, you forget how much the premiums were.

  6. A friend of ours has gone without health insurance for many years now (self employed masseuse), and when the plans all come out he wants help going over them since he’s inclined to turn them all down and pay the penalty. But when I pointed out that because his “on the books” income is quite low, he’s likely to have pretty big subsidies, so that would change the calculus on the matter at least somewhat.

    1. Usually the people who complain loudly about how they can’t afford something really could, like my friend who could certainly afford a premium payment if she gave up cigarettes. I also think there are probably lost of people who qualify or will qualify for state assisted programs and don’t know about them. I’m not sure how to educate people. It seems when you start talking insurance, their eyes glaze over and it seems like you are speaking Chinese.

  7. I am definitely pro health insurance. I don’t have health insurance now and I really want it for me and my girls. My job nor my exhusbands job offers health insurance to employees so I would have to go get it on my own. I had quotes done for me and the cheapest for me and the girls would be $300 a month with a $5,000 deductible. I just flat out cannot afford it right now. I barely make enough money to pay for the basics. Right now the penalty is my only option.

    1. Once the the Affordable Health care act is in full swing you will be able to qualify for a reduced rate subsidized by the government. If you truly can’t afford insurance at the market rate, chances are you won’t have to pay it under this program.

    2. You may be in a great place come 2014. If no group coverage is available to you and your income is low, government subsidies could really help you buy insurance on the Exchange.

  8. I definitely think that everyone should have insurance, mainly because of the catastrophic situations that could arise. With the new regulations insurance plans must cover pretty much everything, which is both good news and bad news. Good news because I don’t think people will see them put up too much of a fight over claims unless they think it is fraud-related, bad news because insurance will be more expensive. In the end, though, I think everyone should bite the bullet and get insurance.

  9. Thanks for sharing some very profound stories, Kim. Although the rebel in me is tempted to say “Screw you – you will NOT force me into having insurance” and take the penalty, the mom in me will always make sure we have some type of coverage. It’s just not worth the risk, at least to me.

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