4 Million Americans to Pay Hefty Penalty for Not Having Health Insurance

Published: Fri 23 Apr 2010

Thomas Kristoffersen

According to congressional figures released on Thursday, almost four million Americans, most of them from the middle class, will be forced to pay a penalty fee if they do not purchase health insurance when President Obama's health care law takes effect.

On average, the penalties will be slightly higher than $1,000 apiece in 2016, according to a report by the Congressional Budget Office.

The majority of the people who pay the fine come from the middle class as the health care overhaul is gradually introduced over the next several years. During his campaign for the White House, Obama promised not to raise taxes on single people who make less than $200,000 per year and couples who make less than $250,000 annually.

Republican Criticism

Republicans have criticized the coverage mandate despite the fact that the idea was first introduced in the 1990s by the GOP and is included in the 2006 Massachusetts health care bill signed into law by then Governor Mitt Romney, a prominent Republican. In more than a dozen states, attorneys general are preparing to challenge the mandate as unconstitutional in federal court.

"The individual mandate tax will fall hardest on Americans who can least afford to pay it, many of whom were promised subsidies by the Democrats and who the president has promised would not pay higher taxes," noted Michigan Representative Dave Camp, the ranking Republican on the tax-writing House Ways and Means Committee.

The ranking Republican on the Senate Finance Committee, Senator Chuck Grassley of Iowa, said that while Democrats tout the benefits of the health care bill, they have a responsibility to acknowledge the law's darker side. "There's a price for not participating, and people will pay it," Grassley explained.

Democratic Rebuttal

Democrats contend that the coverage mandate and penalty fees are necessary in order to expand coverage to the millions who currently lack it. They emphasize that recruiting more Americans, particularly healthy and young people, into the risk pool will lower costs for other policyholders and may lower health insurance premiums.

"The new law will make health insurance affordable for everyone and CBO's analysis confirms that the vast majority of uninsured Americans will find health care affordable and choose to participate," explained White House spokesperson Nick Papas.

Specifics of the Penalty

Those who do not obtain approved health insurance must begin paying penalties in 2014, unless they are excluded because of financial hardship, religious beliefs, or because they belong to American Indian tribes. By 2016, the penalty fees will be fully phased.

Roughly 21 million nonelderly Americans will be uninsured in 2016, according to CBO and the Joint Committee on Taxation estimates. The majority of those residents will be exempt from paying the penalty.