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The Costs of Going Without Health Insurance Under the Affordable Care Act

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Update:  The Centers for Medicare & Medicaid Services (CMS) announced a new short-term special enrollment period from March 15 to April 30, 2015, giving people in 37 states more time to sign up for 2015 health insurance coverage through Healthcare.gov. Act soon to secure health care coverage for you and your family, and to avoid a tax penalty for 2015. For more information, click here. Check your state marketplace website for updates regarding state-run exchange special enrollment periods.

We’re now less than a week away from the end of open enrollment under the Affordable Care Act. The government’s most recent report shows that more than 7.1 million people have selected or re-enrolled in a health plan through Healthcare.gov since open enrollment started on November 15th. When factoring in the 2.4 million people using state-run exchanges, 9.5 million people have signed up for coverage.

Still, millions more remain uninsured.

The cost of health insurance continues to be a barrier for many people, especially middle-income families who earn too much to qualify for a subsidy to help lower the cost of coverage. As a result, some choose to forgo health insurance all together.

It can be tough to fit extra expenses into our budgets. But before you write off the idea of buying health insurance before open enrollment ends, consider the following five points.

1. Your financial risk. Under the health law, remaining uninsured now comes with tax penalties, and they’re increasing this year. If during 2015 you go without health insurance, you’ll pay the greater of $325 per adult or 2% of your household’s taxable income – that’s anything above the tax filing threshold of roughly $10,300 for an individual and about $20,600 for a married couple. That means if you’re single, earning $42,000 per year, you’ll be on the hook for a fine of about $634 for 2015 if you remain uninsured this year.

Then there’s the matter of getting sick or injured. An appendectomy can easily run $16,000 between hospital and doctor bills. The average cost of an MRI in the U.S. is more than $1,100. A more serious diagnosis requiring surgery and ongoing treatment can run into the tens and even hundreds of thousands of dollars.

If you incur medical costs and have any assets to your name, providers can go after them if you’re unable to settle-up.

You can check out the TurboTax Health tool to compare the cost of a penalty vs. the price of health insurance to weigh your options.

2. Tax benefits of insurance at work. If you or your spouse has access to employer-based coverage, that’s often your best bet, even if it seems pricey.

Benefits offered on the job are tax free. That means if 30% of your income goes to taxes, you’ll pay just 70% of your portion of work-based health insurance costs. And remember that when your employer offers coverage, you generally won’t qualify for a premium tax credit to buy insurance through the Marketplace.

3. Shop the Marketplace. If you don’t have access to coverage at work, take a look at the policies being sold on the government Marketplaces.

The health care reform law provides subsidies to help lower the cost of insurance for individuals making as much as $46,680 and families of four making up to $95,400 per year. The less you make the more help is available to you. Nearly 8 in 10 people with marketplace coverage now will be able to find a health plan for 2015 costing $100 or less per month.

4. Look outside government exchanges. If you earn too much to qualify for a tax credit, expand your search for health insurance beyond the government-run marketplaces to explore your options.

A recent analysis of health plans sold in 33 states by eHealth found that compared to Healthcare.gov, consumers who shopped on eHealth had more than 1,900 additional health insurance plans to choose from.

You can work with an insurance agent in your area to explore your options at no additional cost. Find one who sells health plans both on and off the marketplace at the National Association of Health Underwriters: http://www.nahu.org/consumers.

5. Don’t forget new benefits. Finally, when assessing the cost of going uninsured, keep in mind the new benefits health plans must offer, and their potential cost savings.

For example, certain preventive services, such as flu shots, screenings and annual physicals must be covered without additional cost at the time of your visit. And, some health plans choose to waive cost-sharing for common generic drugs.

Insurers negotiate with doctors and hospitals to provide lower costs than you would generally get on your own.

And, the law requires plans to cap out-of-pocket spending this year at $6,600 a year for individuals and $13,200 for families. Sure, that’s a lot of money, but it limits your financial exposure in a worst-case scenario.

For more information about how the Affordable Care Act impacts you and your finances, visit TurboTax Health.

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