Update: Special Enrollment Period, Individual Mandate

Monday, March 30, 2015

Under the ACA, the open enrollment period was scheduled to end February 15th, but the Obama Administration said that it would allow for a special enrollment period for those who discover that they owe a penalty to obtain health insurance and avoid the fine.  This special enrollment period is scheduled to go through the end of tax season.  Federal officials have estimated that close to six million households are at risk of being penalized for not having health insurance.

Early figures show that the special enrollment period is off to a slow start.   When factoring recent research and Industry analytics, it looks as though many uninsured Americans will choose the penalty over the cost of insurance.

A Survey conducted by McKinsey & Co. in February found that 41% of all current uninsured Americans are unaware that a penalty even exists for not having health insurance.  Of the total population of uninsured only 12% said they would buy a policy if informed of the penalty.   While still early, combining the research with the negative analytics and rhetoric coming from Industry Tax-Preparation firms such as H&R Block and a bleak picture is painted for this special enrollment period.

Individual’s in 2014, who are uninsured, will face a tax penalty either $95 or 1% of their income (whichever is higher).  For 2015 these fines will grow to $325 or 2% respectfully.  In the McKinsey & Co. survey an overwhelming percentage of those who choose to stay uninsured sited the penalty was less expensive than the coverage.  

But the uninsured won’t be the only demographic in for a shock this tax season.  Many of the consumers who used the exchanges to purchase subsidized health insurance may see smaller tax refunds or may even have to go out of pocket to the government this tax season and for the foreseeable future.  H&R Block estimates that 7 million of the 11.7 million consumers who benefited from subsidies may have to refund some of that money to the government due to their inaccurate income projections that contributed to excessive tax credits.  Since most people auto-renew their coverage, these incorrect income projections will continue on to the following year and brings to attention a real flaw in the policy.

Source: Mckinsey & Co.’s Center for U.S. Health System Reform online survey of 3,007 uninsured and individually insured adults ages 18-64 conducted Feb. 21-24