2014 Obamacare "Uninsured Penalty" Not Expensive Enough to Make Consumers Buy Health Insurance
To make health insurance premiums affordable, the Affordable Care Act (ACA) aims to maximize the number of people with health insurance, creating a larger risk pool with more healthy people paying premiums alongside less healthy people who consume more medical services. One strategy the ACA employs towards this end is a tax penalty on people who remain uninsured. Initially, this tax penalty is quite small, $95 for an individual in 2014.1
Industry experts have questioned whether the 2014 penalty is sufficient to motivate the uninsured to buy health insurance. HealthPocket surveyed 1,003 people across the United States to learn if the 2014 penalty was adequate incentive to promote health insurance purchases. When asked "Will the $95 IRS penalty motivate you to shop this October for an Obamacare health plan?" nearly two-thirds of consumers surveyed answered "No." Only 8% of those surveyed answered "Yes."
The $95 tax penalty proved as ineffective for younger respondents as it was for survey respondents as a whole.
This is an especially problematic finding. If younger people, who are more likely to be healthy and use fewer medical services, fail to buy Obamacare plans in adequate numbers, health insurance premiums will rise due to a disproportionate representation of older and less healthy enrollees.
The tax penalty is not the only strategy the ACA uses to promote enrollment. Varying degrees of premium and out-of-pocket expense assistance will also be available for individuals and families making less than 400% of the Federal Poverty Level ($45,960 in 2013 for individuals).2 When examining survey results within this income band, HealthPocket found that 63% of respondents answered “no,” indicating the necessity for premium and out-of-pocket assistance to motivate this population to enroll in health insurance. One of the questions left unanswered is whether the new subsidies will be effective in promoting enrollment within this group.
A significant minority of respondents, 29%, responded “Not Certain.” This uncertainty may expose a larger challenge associated with the Affordable Care Act: Low consumer understanding of the legislation. A prior HealthPocket InfoPoll demonstrated that only 4% of respondents knew how the new ACA plans will differ from one another. One of the questions left unanswered in this InfoPoll is what percentage of respondents, prior to this survey, were even aware that the ACA has a tax penalty for the uninsured. Moreover, are these same consumers aware that by 2016 this penalty rises to 2.5% of annual household income or $695 per person?
The Affordable Care Act uses a “carrot and stick” approach to promoting health insurance enrollment. Our survey results suggest that the “stick,” at $95 in 2014, has little weight. Consequently, more pressure is on the “carrot,” the health insurance premium subsidies and expanded benefits, to maximize health insurance enrollment. Towards that end, the combination of premium price, benefit value, and doctor network quality will need to be of sufficient value to get industry analysts and consumer leaders to aid in the promotion of health plan enrollment.
Results are based on responses to an online survey conducted from April 12, 2013 to April 16, 2013. Respondents were asked “Will the $95 IRS penalty motivate you to shop this October for an Obamacare health plan?” Respondents had the option of choosing only one of the following answers: “Yes,” “No,” and “Not Certain.” The order of these options was randomized across respondents. The survey was displayed within a network of over 100 different news web sites and other content sites. Demographic inferencing and methodology to acquire survey respondents was performed by technology administered by Google. Race, education, and health insurance status were not examined. Margin of error across the responses is estimated at +3.2%/ -3.3%.
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This survey analysis was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at firstname.lastname@example.org
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.
1 Most, but not all, adult legal residents of the United States will face a tax penalty if they do not enroll in health insurance. See Congressional Budget Office “Payments of Penalties for Being Uninsured Under the Affordable Care Act” (September 2012) for additional commentary.
2 The Federal Poverty Level for families is adjusted for family size. Residents of Alaska and Hawaii have higher Federal Poverty Level amounts due to a higher cost of living in these areas.