When affordable coverage is still too expensive

Some have stated that as many as 44 millions are living without insurance. If all 44 million of these people are suddenly expected or mandated to pay as much as $600 a month out of disposable income, many if not most are simply not going to be able to make ends meet. What would happen to a person who can’t pay the bill that the new healthcare laws say they have to have?

Carolina Farmer

Dear Carolina Farmer,

Indeed, many people could not afford $600 a month for health insurance!  The Affordable Care Act sets limits on what percentage of a person’s income can be spent on health insurance.  A person earning 200% of Federal Poverty (around $23,000 for a one-person household) would spend 6.3% of his income on his health insurance; subsidies would cover the rest.

It’s possible that even that percentage of his income is too much.  If he can’t pay for his share of the health insurance monthly bill, he would go uninsured and face the tax penalty at year-end.  The IRS is not allowed to actively pursue these penalties; they can only reduce a tax refund.  The penalty would be 1% of his income, much lower than the 6.3% that the health insurance would have cost him.  So, in this way, the penalty is more “attractive” than health insurance.

There are, naturally, other reasons that health insurance is a good idea.  If a person has a home or a savings account, health insurance protects these against his hospital bills.  Once a person becomes seriously ill, he is not able to work and therefore even less able to afford the medical care he needs.  (In some states, he could qualify for Medicaid but not all states offer this to low-income adults.)

So you are correct that some people will still not be able to afford health insurance, but the law is designed to make it fit into people’s budgets.

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.