Like Obamacare, But Worse: The GOP ACA Healthcare Bill Explained, Part 2

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Health Care professionals, including Doctors, Physicians and Registered Nurses, as well as several elected officials are amongst hundreds gathered to protest the Affordable Care Act repeal by the Trump-Administration, at a Feb. 25th, 2017 rally in Center City Philadelphia, PA. (Photo by Bastiaan Slabbers/NurPhoto via Getty Images)

The GOP healthcare proposal still includes the hated individual mandate, but the penalty is higher AND you pay it to your insurance company!

Alright, time for Part 2 on the GOP Obamacare replacement plan.

Let’s talk about what happens if you decide to not have coverage under either of these plans.

We’re talking about the individual mandate and associated penalties for not having coverage with this explainer.

This one’s a bit more complicated, but hopefully it makes sense. Read on!

The Individual Mandate and Penalties

A lot of people have been upset about the individual mandate part of the ACA, and even people who work in healthcare (including yours truly!) will tell you that it’s not their favorite thing. However, it’s necessary to make Obamacare work.

Remember, the ACA *also* made it so that insurance companies could no longer deny you coverage or charge you more if you had a preexisting condition.
And remember, again, from my previous post that the only way that the private insurance market in the ACA will work as intended is if many (mostly healthy) people buy insurance policies. Those healthy people’s premiums are needed to balance out the costs the insurance will have to pay for the sicker people who will also have coverage with them, since they can’t deny those sick people for preexisting conditions anymore.

(Think about it like this: your premium dollars go with everyone else’s premium dollars into a big bucket at your insurance company. When you make a claim, the insurance grabs money out of that bucket to pay your bills. If fewer people are paying into that bucket overall – but those who *are* throwing money in are racking up a ton of claims – you’d eventually have more money being pulled out of the bucket than going in. That is not sustainable.)

So if the ACA had been set up so that no one *had* to have insurance but people could drop and reactivate their coverage whenever they needed it, you’d have a system where people would go uninsured for months or years, but then once they were diagnosed with cancer or needed surgery to repair a torn ACL they’d run out and buy a policy. And the insurance couldn’t deny them!

So you’d have a fair number of people, hypothetically, who would only buy insurance when they needed it, and would then drop it later. That would mean the insurance companies would have fewer dollars in premium money coming in, but a disproportionate amount of money being paid out for all of those sick/injured people. That would likely sink the system.

You need healthy people paying premiums to make the private insurance system work. Unfortunately. (I agree that this is not an ideal situation, but it is the reality we are all working with here in the US.)

Okay, so, the solution that the Dems came up with was to make this “individual mandate,” where everyone had to have insurance coverage or else they’d pay a tax penalty – to the government – at the end of the year. (There are some exceptions to this penalty rule, but generally it’s true for everyone.)

Currently, if you don’t maintain insurance coverage throughout the year you will incur a tax penalty of 2.5% of your income at the end of the year, with a cap of $2085. (Which corresponds to a family income of $83,400.00.)

So if you went uninsured, at most you’d be penalized $2085 on your taxes at the end of the year. (And most likely less.)

No one is jumping with joy about this part of the law, but hopefully the earlier part of my explanation helps you understand why it was put in.

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