Health law penalty to take bigger bite from uninsured

WASHINGTON— The math is harsh: The federal penalty for having no health insurance is set to jump to $695, and the Obama administration is being urged to highlight that cold fact to help drive its new pitch for health law sign-ups.

That means the 2016 sign-up season starting Nov. 1 could see penalties become a bigger focus to motivate millions of people who have remained eligible for coverage, but uninsured. They’re said to be more skeptical about the value of health insurance.

Until now, health overhaul supporters have stressed the benefits of getting covered: taxpayer subsidies that pay roughly 70 percent of the monthly premium, financial protection against sudden illness or an accident and access to regular preventive and follow-up medical care.

But in 2016, the penalty for being uninsured will rise to the greater of either — $695 or 2.5 percent of taxable income — for someone who goes without coverage for a full 12 months. This year the comparable numbers are $325 or 2 percent of income. While the increase isn’t good news, it does create a marketing opportunity.

The numbers are pretty clear. With subsidized customers now putting in an average of about $100 a month of their own money, a consumer would be able to get six months or more of coverage for $695, instead of owing that amount to the IRS as a tax penalty. Backers of the law are urging the administration to hammer that home.

“More and more, people are mentioning the sticks as well as the carrots,” said Katherine Hempstead, director of health insurance coverage for the Robert Wood Johnson Foundation, a nonpartisan organization that has helped facilitate the insurance expansion under Obama’s law.

Hempstead says the message about penalties resonates with uninsured people, who are generally cash-strapped low- and middle-income workers.