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ObamaCare Individual Mandate Fine Hit 8 Million People This Year

An estimated 8 million people had to pay the ObamaCare individual mandate penalty this year. (AP)

Roughly 8 million people faced ObamaCare individual mandate penalties this year totaling more than $3 billion, an analysis of the latest IRS data reveals.

Despite the controversy and high-stakes legal battle that has surrounded the individual mandate, the scope of the penalties paid this year has gone unreported by major news outlets as attention has focused on ObamaCare's latest and most glaring problems: weak enrollment, surging premiums, and insurer losses that have provoked the exit of UnitedHealth (UNH), Aetna (AET) and Humana (HUM) from most state exchanges.

Yet ObamaCare's mounting problems should only serve to intensify questions about the wisdom and fairness of the individual mandate. The root of all of those ObamaCare problems is that far too many people — even those eligible for big subsidies — see the plans as either unaffordable or such a bad deal that they're willing to risk paying a fine.

Another reason for the lack of coverage may be that IRS Commissioner John Koskinen issued two ObamaCare reports to Congress on the extent of penalties paid last year, including one in July 2015, but has been silent about this year's mandate fines.

Yet the IRS Taxpayer Advocate Service included some preliminary statistics on 2016 ObamaCare mandate payments, officially called the Individual Shared Responsibility Payment, when it issued its below-the-radar annual tax season review on July 7. As of April 30, 5.6 million tax returns included mandate payments averaging $442 per return, compared with 6.6 million tax forms including average payments of $190 at the same point in 2015.

More recent data from the IRS wrapping the past tax year show that the final tally for 2015 ObamaCare Mandate fines included payments on 8.1 million tax returns averaging $210 for a total of $1.7 billion.

If the final stats for 2016 reflect a similar increase after April due to filings past the initial deadline, that would mean ObamaCare individual mandate payments on 6.8 million tax forms in 2016, averaging $489. Some share of those tax returns will include fines for more than one adult or a parent and child, just as ObamaCare exchange applications often seek coverage for more than one individual. A conservative estimate of less than 1.2 penalties per return yields a rough estimate of 8 million people paying the fine this year.

The Congressional Budget Office has estimated that about two-thirds of the people paying the individual mandate fines will have incomes below 400% of the poverty level, the cutoff for subsidies.


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When the individual mandate has gotten attention recently, it has been because both the law's supporters and critics alike have noted that ObamaCare penalties are too weak to compel healthy people to enroll. In fact, some of the law's proponents on the left are calling for a harsher ObamaCare individual mandate.

Yet it's now clear that the actual impact of ObamaCare's individual mandate tax penalty is far worse than the benign intent that the Obama administration claimed when it made the case for it.

"What we're talking about is a penalty for the few people who will refuse to buy health insurance — even though they can afford it — and who expect the rest of us to pick up the tab for their care," a September 2009 White House defense of the individual mandate states.

Even as politicians rail against income inequality yet defend ObamaCare, the individual mandate in 2017 will tax away close to 3% of pretax income from modest-wage earners unless they buy coverage that may prove of little use to them.

On average, the cheapest bronze coverage this year costs $930, or nearly 4% of income, for 28-year-olds earning $24,000 a year, just over 200% of the poverty level. For someone of modest means, that's a lot to spend for a plan that won't cover much before the deductible is met. Many of the cheapest bronze plans will carry the maximum ObamaCare deductible of $7,150 in 2017.

That's why many people may end up turning down coverage that's not much more than next year's mandate penalty of at least $695 per adult in 2017, up from a minimum of $325 this year. Another reason is that the bill for deciding to go uninsured starting in January doesn't come due until the tax-filing deadline 15 months later, so people who are struggling to set aside extra money may put off taking any bitter medicine.

Although the individual mandate was tested on a small scale in Massachusetts, that mandate actually bore little resemblance to ObamaCare's. In 2013, the Massachusetts penalty was a lot smaller: $240 up to 200% of the poverty level and $468 up to 250% of poverty. But the RomneyCare mandate didn't need to be as forceful because modest-income households were mandated to buy policies with $0 deductibles, so the coverage was likely to provide real benefits.

By far, the people who get the worst deal from ObamaCare and its individual mandate are modest-wage full-time workers, who are ineligible for the law's subsidies if they are offered what the law deems to be affordable care, even if it is in no way affordable.

This year, a $20,000 earner who is eligible for ObamaCare subsidies can get a bronze plan for $359 per year, according to the Kaiser Family Foundation. But someone at the same income level who is offered insurance at the workplace might have to pay as much as $1,600 for bronze-type coverage — about 8% of income — or else face an ObamaCare fine.

The Taxpayer Advocate Service also reported that 11 million tax returns claimed exemptions from the ObamaCare individual mandate through April of this year, up from 10.7 million a year earlier. Exemptions are allowed for a variety of reasons, including income below the tax-filing threshold, unauthorized immigrant status and coverage deemed unaffordable because it costs more than about 8% of income.