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Skip health insurance, pay $695 fine

WASHINGTON – The math is harsh: The federal penalty for having no health insurance is set to jump to $695, and the Obama administration is being urged to highlight that cold fact in its new pitch for health law sign-ups.

That means the 2016 sign-up season Nov. 1 through Jan. 31 could see penalties become a bigger focus for millions of people who have remained eligible for coverage, but didn’t buy it. They’re said to be squeezed for money, and skeptical about spending what they have on health insurance.

Until now, health overhaul supporters have stressed the benefits: taxpayer subsidies that pay roughly 70 percent of the monthly premium, financial protection against sudden illness or an accident, and access to regular preventive and follow-up medical care.

But in 2016, the penalty for being uninsured will rise to the greater of either $695 or 2.5 percent of taxable income. That’s for someone without coverage for a full 12 months. This year the comparable numbers are $325 or 2 percent of income.

J.R. Damron, chairman of the New Mexico Health Insurance Exchange board of directors, told the Journal this week that the penalty was designed as an incentive to compel people to sign up.

“Some people will sign up because of the penalty, but most of it comes down to cost,” of the insurance premiums, Damron said. “This open enrollment – it’s going to be a challenge for many people to get signed up.”

A Kaiser Family Foundation report released last week said of approximately 233,000 New Mexicans still uninsured, only 13% of these uninsured remain eligible for a tax credit through beWellnm, New Mexico’s Health Insurance Exchange.

While marketing usually involves stressing the positive, rising penalties may create a new pitch: The math is pretty clear. A consumer would be able to get six months or more of coverage for $695, instead of owing that amount to the IRS as a tax penalty. (That example is based on subsidized customers now putting in an average of about $100 a month of their own money.)

Backers of the law are urging the administration to drive the math lesson home.

“Given that the penalty is larger, it does make sense to bring it up more frequently,” said Ron Pollack, executive director of Families USA, a liberal advocacy group. “It’s an increasing factor in people’s decisions about whether or not to get enrolled.”

Damron said the Affordable Care Act has made “some pretty good strides” in terms of getting people insured over the past several years, but it will be harder now that many of those who were eager to obtain insurance have done so.

“You’re getting the high-hanging fruit now — folks who are young and don’t think they need insurance and others,” he said. “This is not just in New Mexico but across the United States.”

Damron also said the New Mexico Exchange is “doing a significant amount of outreach and marketing” to tout the benefits of obtaining insurance under the law, especially in rural areas.

“We’re doing tours through New Mexico and answering questions and trying to get folks educated,” he said.

Controversial requirement

The requirement that individuals get health insurance or face fines remains the most unpopular part of President Barack Obama’s health care law, a prime target of Republican repeal efforts. It started at $95 or 1 percent of income in 2014. The fact that it’s gone up so much may take consumers by surprise.

But many experts consider the mandate essential to Obama’s overall approach, as does the insurance industry. The law forbids insurers from turning away people with health problems, and the coverage requirement forces healthy people into the insurance pool, helping to keep premiums in check. After 2016, the fines will rise with inflation.

The administration has set a goal of 10 million customers enrolled and paying their premiums by the end of 2016 on and state insurance markets. That’s roughly the number covered now, well below what congressional budget analysts had estimated for 2016.

Among the difficulties for next year: Premiums are expected to go up more than they did this year, even if subsidies cushion the cost. The most eager customers have already signed up. And many of those remaining may have other financial priorities for their tight budgets, like car repairs or putting money in savings accounts.

Sign-up season starts Nov. 1 and runs through Jan. 31.

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