A new analysis from the folks at Nerdwallet.com suggests that paying an Affordable Care Act (ACA) penalty for no health insurance coverage can add up over a lifetime.
Whether you choose not to buy coverage because you believe you can’t afford it or you oppose the program on philosophical, you might want to consider long term cost of the penalties.
While the cost varies for each person based on income, if someone age 27 is required to have health insurance under the ACA and does not purchase coverage at any time before becoming eligible for Medicare at age 65, Nerdwallet.com calculates a minimum of $36,556 in penalties for an individual and a minimum of $109,668 in penalties for a family of four. Calculations are based on a 2% increase in the annual cost of living.
Penalties could be less if a person is older or he or she buys coverage at some point before reaching retirement age. But, on the other hand, the penalties could be larger based on a higher income, since the penalty increases to 2% of income in 2015 and 2.5% of income in 2016 and beyond.
Nerdwallet.com notes that because ACA penalties increase over time, it is likely health exchange sign-up rates could be higher in 2015 and 2016. For example, someone who makes around $200,000 in 2016 faces a penalty of $4,500 to $5,000 for one year. Depending on the person’s age, this amount could be greater than the cost of health insurance, so there’s no financial incentive not to purchase coverage.