Sign Up for Health Insurance—or Pay Up for Not Having It, California's Obamacare Exchange Warns

California's Obamacare exchange to stress individual mandate penalty as open enrollment draws to a close

Sign up for health insurance—or pay up for remaining uninsured. As the health law's second open enrollment period draws to a close, Covered California, the largest of the state-run health insurance exchanges set up under Obamacare, is about to start emphasizing the tax penalties one can incur by not getting covered. From a press release today:

It's important that consumers understand now that the cost of remaining uninsured is rising," Covered California Executive Director Peter V. Lee said. "This year, a family of four earning $70,000 a year could pay close to $1,000 in their taxes if they remain uninsured in 2015."

The penalty, known as the "shared responsibility payment," takes effect for 2014, and many who were uninsured will see an impact when they prepare their taxes due in April of this year. However, the penalty rises substantially for 2015, meaning it's important that all uninsured Californians know this and take steps now — before open enrollment ends — to avoid significant penalties when they prepare their 2015 taxes due next year.

"Shared responsibility payment"—in plain English, the fine for declining to carry qualifying coverage—remains one of the most absurd bureaucratic euphemisms in recent memory. 

I suppose it's supposed to evoke feelings of togetherness and community, but there's not much sharing going on: It's your responsibility to either get coverage or pay the fine. And figure out how much coverage you can afford, and what subsidy you qualify for, and so on and so forth.

Which could prove to be an unexpected headache for a lot of folks covered under the law.

The first set of penalties will be assessed during this year's tax season. According to the Los Angeles Times, experts believe that 40-50 percent of families receiving public subsidies under the law might end up owing money back because their subsidy was too large. 

Insurance subsidies provided through Obamacare are based on expected income for the upcoming year; if a family's income turns out to be higher than projected, then the subsidy amount gets recalculated downward, and the family owes the government the difference out of any tax return.

Now, in some cases it will mean that families get money back. But that's not where the problems will occur. The L.A. Times quotes a health policy professor who puts the adjustments in context:

"This could flip people from having a refund to not," said John Graves, an assistant professor of health policy at Vanderbilt University in Nashville. "Nobody can project their income down to the last dollar. It could be a huge deal."

Could be! We'll have to wait until tax season to find out. In the meantime, Covered California is posting a warning.

"This is an important message that should be heard by Californians of all income levels," said Toby Douglas, director of the California Department of Health Care Services (DHCS), which operates the Medi-Cal program. "Applying for coverage not only gives you an opportunity to get comprehensive health care; it can help you avoid a penalty that could hurt you and your family."

Well, at least Douglas and the folks at Covered California are willing to acknowledge that Obamacare includes a penalty that could hurt individuals and their families.

This approach was probably inevitable; the administration and its allies don't always like to talk about the mandate, preferring to emphasize the benefits coverage over the fines for not, but the requirement exists because not enough people would sign up for coverage without it. This effort is just in California, of course, but even still, it's telling that one of the biggest exchanges in the nation is turning its focus this way. 

Even still, there are limits. In November, at the beginning of this enrollment period, Gallup found that a little more than a third of the uninsured would prefer to pay the penalty rather than sign up for coverage.