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. I only clear $211 a week. With my bills I cannot afford the so called AFFORDABLE insurance which has been estimated at over $8000 a year . How can THAT be affordable when it is more than half my yearly salary ? Living in NC we have among the highest gas taxes in the US and now with a rate increase granted to Duke Energy how can I pay bills and purchase insurance ?

    1. Carolyn, I have no idea what your household income is or how many people live in your home, but if that is your entire income, you should have no problem qualifying for Medicaid or whatever NC has as it’s state health program for low income. Again, I’m not familiar with NC, but Colorado’s estimated cost for a mid level plan with the new healthcare exchange is about $340 per month, which is offset with subsidies for anyone making less than about $70,000 per year with a family of four. It might be worth speaking with an insurance agent or community organization about your options. There have been several non-profits in our area who have been hosting meetings to explain how the new system is going to work. Best of luck and thanks for commenting.

  2. Um, why isn’t Irene on her husband’s insurance? Same with her daughter? The thing that upsets me about the new system is how people on Medicare are already seeing cuts in their benefits. I have a friend with epilepsy who can no longer afford their medication because of this. On the flipside, I have a pre existing condition and insurers will no longer be able to turn me down because of it. Still have to figure out how it will effect my premium, though.

    1. It is cheaper for Irene to get her own policy than add to her husband’s, although she still supposedly isn’t getting anything because she’s taking the penalty.

      Like it or not, I believe one good thing about health care reform is that anyone can get insurance. I’ve known people who had skin cancer at an early age and then can never get covered. Forget it if you’re diabetic. I’m very glad pre-existings can’t be denied. The question now is whether they can afford premiums.

  3. Your friend Irene may have qualified for premium and cost sharing subsidies depending upon her family income. They are available for families with household incomes below 400% of the federal poverty level.

    A family of three would qualify for subsidies if income is below $76,000.

  4. I am fully on the side of getting insurance to protect you from exactly the kinds of things you talk about here. You don’t buy insurance to save money in the short-term. That’s not what it’s for. It’s there to save you from catastrophe. I definitely understand that the immediate cost can be difficult, and maybe unobtainable in some circumstances, but if you have a choice (and most do) I really think it’s incredibly short-sighted to go without it.

  5. I can not agree with the sentiment to get health insurance more! I tore my ACL when I was 20 and through my mom’s amazing Ford Motor Company HMO, after going through all the rigamaroll steps, the surgery was FREE. (this was 8 years ago, so I’m sure rates have gone up since). Another friend of mine tore his ACL and needed replacement immediately before his new job insurance started. He was hit with a $50,000 bill that they were able to reduce to no lower than $30,000. If you have disaster insurance, even $10,000 is doable compared to $30,000!

  6. The issue of health insurance is determined by age! If you are young (under thirty), you probably do not see the need for insurance. As you get older, you start to see the need. I think it also depends on other circumstances such as gender and if you plan to have children. When I started working, medical insurance was just another benefit. Now you contribute to the cost and it is much more expensive. Medical insurance is intended to cover you in a disaster.

    1. I don’t understand why people view getting health insurance as any different than having to have auto insurance to drive a car or homeowner’s insurance to have a mortgage.

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