Are You Covered? Obamacare Penalties are Increasing in 2016

Karen Bleier/AFP/Getty Images

Karen Bleier/AFP/Getty Images

If you’re feeling squeezed after the Federal Reserve announced its first interest rate hike in nearly a decade, the pressure is really going to be on as 2016 hits – particularly for those who still don’t have health insurance. That’s because the penalty for violating the Affordable Care Act’s individual mandate is going up in 2016, which basically says you need to have insurance or get hit with what the Supreme Court determined was a ‘tax’.

The individual mandate itself was the crux of the still hotly-debated Affordable Care Act, often called Obamacare, which is designed to provide an incentive for people to find healthcare coverage. The idea is that people without coverage will be hit with a fine, thereby encouraging them to seek out a policy in order to avoid having to shell out more money to the government. Because if they’re going to be paying either way, they might as well get insurance coverage out of it.

This was how the Affordable Care Act’s primary goal – to lower the rates of uninsured Americans – was to be reached. It succeeded in that goal, but it’s still up for debate as to whether the law is a success. We probably won’t have a definitive answer for quite a while, but in the meantime, folks on the ground trying to adjust to the changes are going to have to get covered, or face bigger monetary penalties than before.

How big of a penalty, exactly? Well, if you don’t qualify for any of the exemptions laid out by the IRS, you’ll end up paying either 2.5% of your household income, or a per-person fee that includes $695 per adult, and $347.50 per child, up to a maximum of $2,085. For comparison, the maximum in 2015 was $975, and in 2014 it was $285.

For those who still plan to hold out and avoid getting coverage, while not paying the fine, you don’t necessarily need to worry about criminal penalties. But the IRS will withhold any amount due from your future tax refunds. The government has even set up a tool to estimate your fee, if that’s the route you plan to take.

So, if you’re not covered, you might want to figure out a way to get a policy, because the penalties are not going to get any smaller. Still, you have every right to be concerned that you’re going to get gouged either way. Some reports are indicating that health insurance companies are getting set to jack up the price of policies in 2016. And why wouldn’t they? Under the current setup, they have a lot of power.

The real issue at the heart of the healthcare debate is that there isn’t really a debate at all; our leaders refuse to have any sort of discussion about real solutions, whether that includes instituting a public option or single-payer system, or finding a way to allow the market to function more fluidly and independently. Instead, either side has dug their respective trenches and is either defending the Affordable Care Act to the death, or continuing to try to repeal it – with no alternative ideas in mind.

It’s a messy situation, and one with no clear outcome in sight. For now, most Americans are simply going to have to figure out a way to cover themselves, or get hit with the fee for not having a policy. Nobody’s really happy about that, but this is where things stand.

If you’re still on the outside looking in, in terms of coverage, the current Open Enrollment Period is in effect until the end of January. There are a couple of special situations that will allow for enrollment outside of that window, however, including having a child, or losing previous coverage.

So, the government is tightening the proverbial screws on Americans, and in an economy that is healthy, yet still not troubled, things could get interesting. Or ugly. All you can do is make sure you’re covered, and are planning for a more expensive 2016.

Follow Sam on Facebook and Twitter @SliceOfGinger

More from Money & Career Cheat Sheet: