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Small Business Employee Benefits and HR Blog

Fewer Americans Will Pay Individual Mandate Penalties, CBO Estimates

June 9, 2014

The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) released an updated estimate of how many Americans will have to pay the fine for not complying with the individual mandate.

The individual mandate fine for not having adequate coverage in 2014 is $95 or one percent of annual income, whichever is greater. The fines increase to $695 or 2.5% of annual income in 2016, whichever is greater. The fines are also referred to as the individual shared responsibility payments.

2 Million Fewer to Pay Individual Mandate Penalty in 2016

According to the updated report released this week, an estimated 4 million people will pay a penalty because they are uninsured in 2016. This is 2 million fewer people than projected in CBO's last (2012) analysis.

The decrease in the number of people projected to pay the penalty largely stems from a projected increase in the number of people who will qualify for an exemption. This also means that the fine will generate an estimated $3 billion less.

According to the report, CBO and JCT estimate that about 30 million nonelderly residents will be uninsured in 2016 but that the majority (23 million) will be exempt from the penalty. Those who are exempt include:

  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;

  • People with income low enough that they are not required to file an income tax return;

  • People who have income below 138 percent of the federal poverty guidelines level and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;

  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and

  • People who are incarcerated or are members of Indian tribes.

Of the remaining 7 million uninsured people, CBO and JCT estimate that about 3 million will be granted exemptions from the penalty because of hardship or for other reasons. This leaves 4 million people will pay a penalty because they are uninsured in 2016, which also includes uninsured dependents. An estimated $4 billion will be collected from those who are uninsured in 2016, and, on average, an estimated $5 billion will be collected per year over the 2017–2024 period. For fiscal years 2015 to 2024, CBO and JCT estimate that payments will total $46 billion.

CBO and JCT also updated their estimates of the distribution of penalty payments by income category. In 2016, households with income that exceeds 400 percent of the federal poverty guidelines are estimated to constitute about one-third of people paying penalties, and to account for about three-fifths of total penalty payments.


What do you think of the new individual mandate projections?

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