What is the 2016 Penalty for Not Having Health Insurance?

The 2016 Penalty for Not Having Health Insurance

The Affordable Care Act (ACA), also known as Obamacare, requires all individuals to have minimum essential health coverage or pay a tax penalty. The penalty for not having health insurance in 2016 was the greater of $695 per adult and $347.50 per child under 18, up to a maximum of $2,085 per family, or 2.5% of household income above the tax filing threshold, whichever is higher. Let's take a closer look at the penalty for not having health insurance and its implications.

Penalty Calculation

Calculating the penalty for not having health insurance can be complicated. The penalty is based on the number of months in a year that a person or family is uninsured. The penalty is prorated for each month without coverage, and the total amount is due when filing income taxes. The penalty is based on the highest of the two amounts - the fixed dollar amount or the percentage of income.

For example, if a family of four without insurance had a household income of $100,000 in 2016, the penalty would be $2,500, or 2.5% of their income above the tax filing threshold, which was $20,300 for married couples filing jointly. If the family had been uninsured for only six months, the penalty would be half of the annual amount or $1,042.50.

Exemptions

Some individuals are exempt from the penalty for not having health insurance. These include:

- Individuals who cannot afford coverage

- Members of certain religious sects

- Individuals who are incarcerated

- Individuals who are not lawfully present in the United States

- Individuals who experience a hardship that makes it impossible to obtain coverage

Additionally, individuals who have a short coverage gap of less than three months in a year are exempt from the penalty.

Implications

The penalty for not having health insurance is intended to encourage individuals to obtain coverage and help spread the risk of healthcare costs across a larger pool of individuals. Without the penalty, healthy individuals may choose not to purchase insurance, leaving only those who are sick or have high healthcare costs in the insurance pool. This could lead to higher premiums for everyone.

It's important to note that the penalty for not having health insurance increased in subsequent years, reaching a maximum of $695 per person or 2.5% of household income above the tax filing threshold in 2018. The penalty was eliminated in 2019, but it's still important to have health insurance to protect against unexpected healthcare costs.

Insurance Tips

Having health insurance is just one part of a comprehensive insurance plan. Here are some tips for selecting the right insurance coverage:

- Shop around and compare plans to find the best coverage for your needs and budget.

- Consider the deductible, copayments, and coinsurance when selecting a plan.

- Make sure your doctors and hospitals are included in the plan's network.

- Consider adding additional coverage, such as dental and vision insurance or disability insurance.

- Review your insurance coverage annually to ensure it still meets your needs.

Conclusion

The penalty for not having health insurance in 2016 was the greater of $695 per adult and $347.50 per child under 18 or 2.5% of household income above the tax filing threshold. The penalty was intended to encourage individuals to obtain health insurance and help spread the risk of healthcare costs across a larger pool of individuals. While the penalty was eliminated in 2019, having health insurance is still important to protect against unexpected healthcare costs. When selecting insurance coverage, it's important to shop around, consider all the costs, and review your coverage annually.