Health Insurance Penalty for 2017
Posted: August 31, 2016
by John Hansen
The health insurance penalty in 2017 will continue to be the same as in 2016 with one difference. The flat dollar amount will be adjusted for inflation and calculated based on the Cost of Living Adjustment (COLA).
The Penalty in 2016 Serves as the Baseline
In 2016, Americans paid a tax penalty of 2.5% of the household income, or they paid a flat dollar amount of $695 per adult and $347.50 per child up to $2,085 per household, whichever was greater.
What Changes in 2017
In 2017, the 2.5% of household income penalty remains. However, if the flat dollar amount is greater, then you would pay the 2016 dollar amounts plus the Cost of Living Adjustment (COLA).
Minimum Essential Benefits
In order to avoid the Obamacare health insurance penalty, you will need to be covered on a medical plan that includes the minimum essential benefits. All of the Bronze, Silver, Gold and Platinum plans offered through the state and federal exchanges include coverage with these essential benefits.
The Mandate: 3 Months or More with No Health Insurance = Penalty
If you have no coverage for 3 months or more in 2017, then you will pay a no health insurance penalty when you file your taxes in 2018. This may mean you get less of a refund, or it might mean you have to pay more to the IRS.
Scenario #1: Single Adult Making $30,000 Goes Uninsured in 2017
The flat dollar amount for a single adult is $695. However, with the 2017 penalty for having no health insurance, you’d have to add COLA. Assuming the 2017 COLA was 3% (see COLA chart below), you’d have to add $20.85 for a total of $715.85. However, 2.5 % of the $30,000 household income comes out to $750, which is greater, so this individual would pay a penalty of $750.
Scenario #2: Family of 3 Making $45,000 Goes Uninsured in 2017
For two adults and one child, the flat dollar amount penalty would be $1,737.50 plus COLA. Assuming a COLA of 3%, that would add $52.13 for a total of $1,789.63. 2.5% of the $45,000 household income only comes out to $1,125, so the 2017 penalty for having no health insurance for this family would be the greater flat dollar amount of $1,789.63.
Should I Try Avoid the Penalty?
Some healthy individuals who don’t visit the doctor very often have decided that they’d rather just go uninsured and pay the penalty. For many Americans, they can save thousands of dollars by not signing up for health insurance.
However, there’s a risk. We are all just one accident or one disease away from serious medical expenses. Many have played this game of Russian roulette and lost, ending up with tens of thousands of dollars in medical bills.
How to Avoid the Penalty
You might just want to get the cheapest coverage you can find. That way you don’t want to pay the no health insurance penalty, you have a just-in-case medical plan in place, and you won’t be paying too much on your monthly premium.
Also, keep in mind that you might qualify for government assistance on your premiums. In many cases, low income Americans will save money by buying a medical plan as opposed to just paying the penalty for having no health insurance.