Uninsured opting to pay penalty
BY Sarah smith
Tax preparer Carrie Robbins is finding lots of uninsured Minnesotans this season.
Health care insurance was required in 2014, or tax filers face a penalty or exemption.
Robbins is seeing lots of both. And what’s surprising is that those who don’t qualify for an exemption because their income is too high are opting for the penalty, because it’s cheaper than buying insurance, she said.
“A lot of them are getting the exemption,” Robbins said. “Some people I’m expecting around $2,000 for the penalty. But it’s cheaper to pay the penalty” than the premiums for health insurance.
The penalty for the first year is $85. But if you read the fine print, it’s “$95 per adult member of your household ($47.50 for dependents under 18) or 1 percent of household taxable income less the minimum filing amount,” H&R Block instructs its preparers, Robbins included.
In 2015 the tax penalty will increase to $325 per adult or 2 percent of household income “which will hit you when you go to pay your taxes in 2016,” the H&R Block instructions indicate.
“And by 2016 the tax penalty will be $695 per adult or 2.5 percent of household income,” the instructions say.
Those penalties might “encourage” people to buy health insurance, Robbins believes.
And you must settle those costs at tax time. If you were expecting a refund, Robbins said, the penalty could be deducted from that refund. Conversely, if you’re someone who pays in, Robbins said the penalty will be added to your income tax bill.
You can qualify for an exemption if you had health insurance coverage by May 1, 2014, if you’re a non-U.S. citizen without valid immigration documentation, if your household income is below the minimum filing amount, or other reasons.
The state has a different take as to whether the penalty is worth taking.
“As the April 15 tax dead-line approaches now is a good time for many Minnesotans to realize that in many cases the monthly premiums for MinnesotaCare, the state’s health care program for low-income Minnesotans, will be less than the tax penalty imposed on people who do not have health insurance,” said the Human Services Commissioner Lucinda Jesson.
“Everyone should have affordable health care coverage,” added Jesson, “and for many Minnesotans the cost of that insurance will be less than what they’ll pay for having no insurance at all. For many Minnesotans it should be a no-brainer.”
Most MinnesotaCare enrollees pay a monthly premium based on family size and income. Premiums range between $0 and $50 per month. Families of four earning between $32,000 and $47, 700 are generally eligible for MinnesotaCare, and a family of four earning $36,000 would be $25/month per adult. Indi-viduals earning between $15,500 and $23,340 are generally eligible.
At this level and below, the monthly premium is less than the minimum tax penalty imposed on Americans who lack insurance.
In 2015 adults across the country who don’t have coverage will pay $325 or 2 percent of their yearly household income, which-ever is greater. The mini-mum $325 fine breaks out to $27 per month, which is more than premiums for many MinnesotaCare en-rollees.
In addition to low premiums, MinnesotaCare also has no deductibles and low copays that minimize out-of-pocket expenses.
“MinnesotaCare is a good deal,” said Commissioner Jesson. “Not only will many Minnesotans pay less in premiums, but they’ll have health insurance so they won’t be on the hook for all of their health care expenses.”
Enrollment for Minneso-taCare and Medical Assis-tance (Minnesota’s publicly funded health care programs) continues year round and a person can sign up anytime.
This report was supplemented with information from MinnesotaCare.