Before Obamacare became law, health insurance was optional, but it’s a federal requirement now.
Americans who didn’t have coverage in 2014 will face a tax penalty on their upcoming return. Plus, people must enroll in a plan by Feb. 15 to avoid paying a bigger fine next year.
On a recent weekday afternoon at the Old Town office of the nonprofit San Diegans for Healthcare Coverage, Rob Keller was trying to choose a health insurance plan. He brought his pay stubs because determining his annual income from his job as a waiter is key to finding out whether he’s eligible for free Medi-Cal coverage, or a discounted Covered California plan.
"I’ve had health insurance in the past, just because I was with my company," the 27 year old said. "But I never really used it or needed it, I don’t go to the doctor that much.”
Even so, Keller said the deadline prompted him to get with the program.
“I didn’t want a penalty for getting nothing," he said. "I might as well pay money to get health insurance."
More than 17 million Californians get health insurance through their job. For Keller and the more than 6 million Californians who don’t, the deadline looms large. By that date, they must be enrolled in a plan or they’ll face a federal tax penalty on next year’s return.
The penalty will be $975 per family, or 2 percent of annual household income, whichever amount is greater.
San Diego State professor of accounting Steven Gill said that’s not a lot of money.
“We’d rather pay nothing than something, but it’s unlikely that anyone would have to go bankrupt because they ended up having to pay the penalties and the fines associated with Obamacare," Gill said.
As it turns out, Gill said the law prohibits the Internal Revenue Service from pursuing civil or criminal penalties to collect the Obamacare penalty.
“The IRS isn’t really going to pursue you with any rigorous enforcement, even if you don’t pay it," he said.
The Internal Revenue Service will simply subtract the penalty from any future refunds.
But there's a bigger risk than getting a smaller tax refund, said Jan Spencley, who directs San Diegans for Healthcare Coverage.
“I think the biggest penalty is not having coverage and not having access to care,” she said.
Spencley pointed out no one knows when they’re going to be sick or have an accident. Without insurance, one trip to an emergency room can mean financial ruin, she said.
“So people really need to understand there’s value in insurance," Spencely said. "It limits your liability, it gets you free preventive care, and it also makes sure you don’t have small things turn into large things.”
Nonetheless, local banking executive Toby Hayes and his wife, Stephanie, have decided to roll the dice.
Their six kids are covered under Medi-Cal, and Toby gets insurance through his job. But Stephanie is uninsured.
Toby said it was just a matter of finances.
“The basic bronze plan for Stephanie, it was gonna be like $4,000 a year," Toby said. "It comes down to like $334 a month, versus what we pay in the penalty, which was $763 for the year."
The couple who lives in Rancho Peñasquitos is aware that the penalty will be higher in 2015. But Toby said it’s still cheaper than buying health coverage.
Stephanie doesn't think she’s taking a big chance by being uninsured.
“I’ve always been a very, very healthy person. If tomorrow, I come down with cancer, then we’re gonna figure something out when we get there," she said. "But right now, I hate wasting money.”
But for people who believe health insurance is valuable and want to avoid a tax penalty, the deadline for enrolling in a Covered California plan is just over a week away.
Otherwise, whatever health issues crop up, people will have to wait until the next open enrollment period to sign up.
