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High Deductible vs. Tax Penalty

Wednesday, November 11, 2015

The third round of open enrollment has commenced and millions of Americans will be making a decision between paying the IRS a $695 mandate tax and enrolling in one Healthcare.gov’s high deductible bronze plans.  No state highlights the choice that Americans will struggle with better than Mississippi.
 
Last year, working class Mississippians earning around 200% of the poverty level had the choice between enrolling in a health plan or going uninsured and paying the penalty.  That penalty, for going uninsured in 2014, was just $95 or 1% of taxable income.  This year, many Mississippians and Americans will learn that their penalty, for going uninsured, will be sizably increased to $695.
 
Unfortunately, for the working class of Mississippi in 2016, the subsidized premiums for many of the “affordable” plans is about to jump and the subsidy itself will shrink.  The divergence is so great that their after-subsidy cost will spike by 60%.  This type of exchange option is mirrored across the state.
 
In the end, the working class will have to choose between paying a penalty and buying a policy that they might not be able to afford that can come with a deductible as high as $6,800.  These types of lackluster options are sure to make 2016 the biggest test for the individual mandate to date.