Let’s say you’re in the same boat as my partner and me. We live in the US. We have no health insurance. We couldn’t afford health insurance. Affordable group plans are not available to us (we’re self-employed). We couldn’t afford (and frankly, don’t need or want) the lowest-tier “bronze”-level insurance plan. We don’t qualify for Medicaid, and we’re way too young for Medicare.
Truth be told, we would like to have health insurance. All we would need is the high-deductible, major medical, catastrophic type–you know, for emergencies. So that a broken bone or an emergency surgery or an ambulance ride from a car wreck doesn’t bankrupt us.
Because we have no life insurance, either. Or disability insurance. The only insurance we have is the auto insurance on our truck, which is full coverage. I do like my peace of mind.
But health insurance is a different story. We’re legally married. We have no children, nor the anatomical ability to have children (neither of us are physically able to parent a child, with any partner). We have no plans to adopt children. We’re not chemically dependent/addicted, nor are either of us mentally ill.
So why we should legally be forced to obtain an insurance policy that requires “minimum essential coverage” (on two of us, who would be charged the same as a family of four, or even six people, in many cases, no less) or face paying a “tax”/”fine” (whichever they’re calling it this week, which depends highly on to whom they’re talking, in order for it to remain legal), known as the “shared responsibility payment”, is completely beyond me.
To be considered sufficiently covered, a health insurance plan must contain The 10 Essential Benefits, which are:
- Outpatient care – doctor’s visits and such
- Trips to the Emergency Room
- Inpatient care – when you’re in the hospital
- Prenatal care, baby delivery, and immediate post-natal care
- Mental health and substance abuse services like counseling and behavior therapy
- Prescription drugs
- Services and devices for people who are injured or have a chronic health condition, including occupational therapy, psychiatric rehabilitation, and others
- Lab testing (although probably only the bare minimum deemed “medically necessary”)
- “Preventive” services like screenings (which are merely early detection, not actual prevention), vaccines, counseling, and more chronic disease management
- Pediatric services like dental and vision care for kids
Of those, we could probably use number 9 (the counseling aspect only) right away. In addition, we might someday find ourselves in a position where we have a need for numbers 1, 2, 3, 6, 7, and maybe 8.
High-deductible catastrophic health insurance plans still exist. And they already tend to cover a lot of what we could see an eventual need for.
But opting for one of those doesn’t cut it, says the government, because they lack some of the 10 components of “minimum essential coverage”. So even though I will absolutely never need numbers 4 and 10, I would still be forced to pay for that coverage. Argh. So much for the “land of the free”.
Technically, our lack of net income qualifies as an exemption for having to pay the above-mentioned “tax”/”fine”. But in case our income does swing upward (or spike, due to unusual circumstances), I had to devise a Plan B, a contingency. I wanted to find out exactly what happens if you can’t secure an exemption, but still neglect to pay the “tax”/”fine”.
The Usual Suspects, the higher-ranking government and health insurance company-related websites were of zero help. They were completely silent on the issue. They expected everybody to simply comply, without any lip.
I was one step ahead of them, though; I had expected that lack of transparent information. I mean, what entity would actually come out and straightforwardly tell you what your real options were when they really only wanted you to comply with what they wanted?
After several fruitless Google searches, I was starting to think that no one had actually looked into this issue. But certainly someone had to have! So I plunged forward. I don’t give up very easily. I know that the Powers That Be hope that I will. But I don’t.
I finally entered in some long-ass search string…. “what happens if you don’t pay tax fine health insurance” or something like that.
Eureka! Someone actually had looked into it, and Google cooperatively buried the story fairly far down in the Google Search results. Three cheers for stubbornness–ahem–tenacity. Whatever we want to call it, it pays off sometimes. It might be annoying to some, but it’s an advantage to me.
So… what’s the article and what did it say?
First questions first. The article can be found here (link to the article as it was archived by the Wayback Machine, for those of you using AdBlockers, since Forbes is one of those idiot-sites that will block browsers with adblockers from viewing content).
Paraphrasing three separate Forbes articles on this issue, including the one linked to above…
Basically, if you do not obtain or maintain health insurance coverage, and you do not qualify for one of the eight(?) exemptions provided for by the legislation (the Affordable Care Act or ACA, sometimes referred to as Obamacare, which is kind of a misnomer), then technically you are subject to the “tax”/”fine”, which must be paid along with your taxes.
Apparently, in years past (2014-2016, so far), if you did not pay the “shared responsibility payment”, the IRS would kick back your tax filing. I’m not sure how one would proceed at that point; I mean, the person isn’t neglecting to pay their regular tax bill!
As of this year (2017), however, the IRS promised it would accept the tax returns after all (link to Forbes article as this one doesn’t reject my Adblocker for some reason and the Wayback Machine hasn’t archived it yet), even if the tax filer had remained silent about the health insurance part (known as Line 61 on the tax return).
Of course, the IRS didn’t make that known before tax returns were due; they remained silent until afterward (another Forbes article linked through the Wayback Machine). They wanted to rope people into making their “shared responsibility payment” for at least another year.
So what actually happens to you if the “shared responsibility payment” applies to you but you don’t pay it?
I’ll tell you.
If you are owed a refund on your taxes, as most people are, the law allows them to yank it from you by subtracting it from your tax refund.
What if you’re self-employed and don’t get a refund? Apparently, not much (link to another Forbes article through the Wayback Machine). I’m not a lawyer or CPA/accountant, but the phrase IRS actually has little recourse! The agency merely can deduct your refund”, straight from the article itself, doesn’t exactly require a law degree or CPA license to understand. 😉
Let’s explore this in more detail…
The ACA law itself intimidates the public by stating that the penalty “shall be paid upon notice and demand”, and went on to say that the “tax”/”fine” would be “collected in the same manner as an assessable penalty under subchapter B of chapter 68″, which also sounds frightening, especially since this subchapter B mentions some serious penalties for not complying with other parts of the Tax Code.
Would the penalty for not paying the “tax”/”fine” be a jail sentence? No. Not allowed, says Section 500A(g)(2)(A) (link to Cornell University) of the Affordable Care Act.
They also can’t slap liens on your property or anything else, according to Section 500A(g)(2)(B)(i).
Nor can they garnish your wages, freeze your accounts, or seize your assets, says Section 500A(g)(2)(B)(ii).
The law has baby teeth at best; about all they can do is withhold or seize all or part of your tax refund in order to settle up your “shared responsibility payment”. They IRS has not, to my knowledge, openly come out and said that it will start doing this, however; the law simply gave them the power to do so. And that’s all the law gave them the power to do.
So is not paying the “tax”/”fine” the same as not paying the rest of your taxes? Won’t the unpaid balance be treated like unpaid taxes and incur interest and penalties?
And therein, folks, lies the real story. That’s the whole story, but it’s the essential component that no one’s telling you about. The statist (lapdog) information sources won’t come out and admit that they’re this lenient, and they’ll resort to all kinds of scare tactics to intimidate everyone into either signing up for over-inflated insurance or paying an unnecessary (and ballooning) “tax”/”fine”, but the truth is that it’s basically a house of cards. The only way that neglecting to pay can actually hurt you (that I know of) is if you’re accustomed to receiving a large tax refund and you’ve come to rely on that refund, figuring it into a substantial part of your yearly budget.
But there’s a way around that, too. Claim a higher number of dependents on your W2 form until the very end of the tax year; this will reduce the amount of money withheld from you that you would get back on your tax refund. At the last minute (or preferably a short time before), switch the number of dependents back to its real number. Voila; your tax refund will be smaller, so budget for that, but at least that’s less money available to the IRS when they go sniffing (which they might).
Again, I’m not a lawyer, paralegal, tax preparer, CPA/accountant, or financial planner. This is not meant to be impermeable advice, because the truth is, I don’t know much on my own; I’m simply gathering and packaging information I’ve found elsewhere into plain language as my fallible self has interpreted it. And of course, I’m human, so I’m bound to make mistakes. Hopefully, my reading comprehension of the articles linked to above is not one of them. 😉