tommy hilfiger polo and IRS is stepping up enforcement
Despite all the wrangling in Washington, the Affordable Care Act penalty for people who don’t have qualifying health insurance remains in effect for 2018.
And, in fact, the IRS is quietly moving to strengthen enforcement of the penalty, which is also known as the “Obamacare” individual mandate.
A perennial target for those who want repeal of the ACA, the mandate has come under criticism alsofrom those who say the penalties are not steep enough to keep healthy people in the marketplace so premiums don’t spiral out of control.
In the spring, the IRS says, people will have to answer the question about health insurance or for the first time their tax returns for 2017 will be automatically rejected.
“The IRS has determined that it is more burdensome for taxpayers to allow them to file an incomplete tax return and then have to manage follow up letters and potentially amend their return,” IRS spokesman Bruce Friedland said in an email.
And, he noted, in September the IRS started sending letters to about 130,000 people nationwide who didn’t answer the questions in their 2014 and 2015 tax returns. State and county numbers are not available.
As for 2016 returns filed this spring, he said it typically takes until the next summer before the agency begins to contact filers about information they provided.
The automatic rejections had originally been scheduled to take effect for 2016 returns, but the Trump administration changed course on that shortly after taking power.
By the numbers
Final adjustments for 2018 haven’t been announced yet, but the prorated penalty’s expected to be about the same as last year: $695 or 2.5 percent of household income, whichever’s higher, for a whole year without coverage.
The penalty started in 2014 and increased in subsequent years. Multiple exemptions are available, including for people with incomes under certain levels or who, in 2018, cannot obtain coverage at less than 8.05 percent of household income.
The IRS said 8.1 million households paid average penalties of $210 for 2014; 6.8 million paid an average of $489 for 2015; and for 2016 preliminary numbers show 4 million paid an average of $708.
Last week Republican Senators Pat Toomey of Pennsylvania and Tom Cotton of Arkansas unveiled a new attempt to do away with the individual mandate.
Toomey cited IRS records that show about 225,000 Pennsylvania filers paid individual mandate penalties in 2015 and that roughly 80 percent of those filers had household income under $50,000.
“If an individual or family cannot afford Obamacare’s overpriced plans, they are punished financially by their own government with the individual mandate,” he said in a news release, calling the penalty a “cruel, unjust tax.”
Their proposal would exempt people from the penalty on three conditions: if they earn less than the national median household income, if average premiums in their state increased by more than 10 percent, or if they live in a county with only one insurer on the marketplace.
In a Fox News op ed Toomey and Cotton called the proposal “something both parties can rally around” and said “it doesn’t dismantle Obamacare.”
Experts, however, have generally described the penalty as a key provision of the law that could not be abandoned without hurting the marketplace.
In December, the nonpartisan Congressional Budget Office estimated that eliminating the individual mandate would result in about 28 million more people uninsured by 2026, increase premiums by about 20 percent, and reduce federal budget deficits by $416 billion between 2018 and 2026.
The other change
Another big change this year is that people will be able to sign up for individual 2018 health insurance plans from Nov. 1 to Dec. 15 just half as long as last year’s open enrollment.
Premiums are rising an average of 31 percent across Pennsylvania for 2018 marketplace plans due largely to the uncertainty in Washington.
However, regulators here handled it in a way they said should keep many from seeing that increase if they shop wisely by comparing qualified plans both on and off the ACA marketplace.