4 million will pay health care penalty -- CBO report

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- About 21 million Americans will be uninsured in 2016, when health care reform laws are fully implemented, with 4 million of them subject to a penalty for failing to buy insurance.

Those projections were released Thursday in a report from the nonpartisan Congressional Budget Office. The CBO said that collections from the penalty will total $4 billion a year over the 2017-2019 period.

High-income families making at least $96,000 will pay two-thirds of those fines, while families making between $24,000 and $96,000 will contribute nearly one-third of the funds collected.

Under the health care overhaul, which legislators passed in March, most U.S. residents will be required to purchase health care or pay a fine. By 2016, the penalty will be either a flat $695 per person a year, or 2.5% of household income -- whichever is higher. The fines are capped based on income.

The CBO report noted the majority of the uninsured will not be subject to these fines because they belong to exempt groups including extremely low-income households, some religious sects and unauthorized immigrants.

Not everyone is convinced that the penalty will be enough to get people to buy insurance.

"The penalty is much too small to be effective," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan policy research group. "It's a real Achilles heel that could raise risks for the success of the entire reform."

Ginsburg said the problem is two-pronged: The penalty is not high enough to convince the uninsured to throw in a few extra dollars to buy a policy, and the removal of pre-existing conditions means they can wait to purchase insurance until they need it.

Penalty revenue by income level

Of the 4 million people who will pay the fine, about 9% will have annual income below the poverty line: $11,800 for individuals and $24,000 for a family of four. Fees paid by that segment of the population will make up 4% of the total money collected from penalties.

In contrast, households with income above 400% of poverty level -- more than $96,000 -- will comprise 36% of people paying the penalty, and 66% of the total penalty revenue.

President Obama signed the health care overhaul into law March 23, despite unanimous Republican opposition. The plan is projected to extend insurance coverage to about 32 million Americans who are currently uninsured. The government will help people pay for it by expanding the Medicaid program, as well as giving out subsidies and tax credits.

States will be required to create exchange programs that will allow individuals and small businesses to shop for insurance and negotiate better prices. But several states have filed suit, saying the overhaul is unconstitutional.

Ginsburg, of the Center for Studying Health System Change, said legislators should either increase the penalty or limit the ability of people to buy coverage after they get sick -- either with open enrollment windows, or by adding a deadline for signing up without pre-existing conditions.

"I don't want to say it won't succeed, but there are real risks," Ginsburg said. "We've got a long way to go before this law is put in place, but we need to use those years to make major fixes." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 8:18am ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.21 0.00 0.00%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

GM won't have to tell customers to keep their recalled cars parked until fixed, after a federal judge denied emergency motion Thursday. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.