When Angela Denig couldn’t cover the costs of Obamacare health insurance this year, she made the only decision she could: She gave up on coverage, paid the fee for not being insured and hoped she wouldn’t get sick.
A few months later, a health scare would put the South Florida woman’s high-stakes gamble to the test. But at the time, she said, the calculation was clear. Paying a “several hundred dollar” penalty for remaining uninsured was much cheaper than forking over a monthly insurance premium of at least $200 under the Affordable Care Act — the only insurance she qualifies for.
For Denig, buying insurance for herself is way down on a list of expenses that starts with taking care of her two teenage sons. And the penalty, which is designed to exert increasing pressure on the uninsured to sign up for a plan, wasn’t high enough this year to change her priorities.
The Obamacare fee is still small enough this year — $95 or 1 percent of household income in 2014, whichever is greater — to make it worthwhile for people like Denig to opt out of health coverage. The U.S. Department of Health and Human Services estimated earlier this year that 2 to 4 percent of consumers would pay the penalty, but final numbers have not yet been released by the Internal Revenue Service.
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That’s likely to change, though, when the penalty nearly quadruples next year and then spikes to $695 or 2.5 percent of household income, whichever is greater, in 2016.
For Denig and others, the affordability of insurance is still the key question — and the main frustration.
“I feel let down and defeated,” Denig, 41, said of the high premiums she was offered and rejected. “Then they’re gonna punish me by making me pay for it?”
The Margate office manager said that when she checked her Obamacare eligibility online, she was floored to see her premiums ranged from $200 to $500 per month. Financial assistance to reduce premiums is available to those whose incomes are below 400 percent of the federal poverty level, which for an individual is $46,680 a year.
But she didn’t qualify for a subsidy to make insurance more affordable. She went to H&R Block to be sure she had her facts right. She learned that household expenses aren’t part of the equation when determining who gets reduced-cost premiums. And that she’d be required to pay a penalty if she didn’t enroll in an insurance plan.
“When they said 1 percent of your income, I almost fell out of my chair,” she said.
She chose the penalty, hoping she could manage for a year without insurance.
Stitching Together Healthcare
Who chooses to pay the penalty rather than pay for insurance tends to vary by income bracket.
Health centers that generally enroll lower-income consumers say they have seen more people who decide to pay the penalty. Conversely, health advisers with clients who have a variety of income levels say they see fewer people deciding to pay the penalty.
In general, access to health insurance increases as income increases, often through employer-obtained coverage, said Joan Alker, executive director at the Georgetown University Center for Children and Families. Part-time and service jobs that usually pay less tend not to offer health insurance.
And those consumers — who fall below 400 percent of the federal poverty level, the limit to receive financial assistance toward health insurance — are more likely to be the penalty payers.
Eduardo Herrera, a coordinator for outreach and enrollment programs at Community Health of South Florida, said about a quarter of the 7,800 people the centers helped during the most recent enrollment period — from Nov. 15 to April 30 — ultimately chose to pay the penalty rather than buy insurance.
The centers serve an overwhelmingly low-income and uninsured population, which means the same people who decided not to buy insurance might later turn to those clinics for low-cost and free healthcare.
And what’s affordable for one person can be unaffordable for another, Herrera said. Premiums also can change, year to year.
In Miami-Dade County, premiums rose 1 to 5 percent for the benchmark silver-level Obamacare plan from 2014 to 2015, according to nonprofit health policy group Kaiser Family Foundation.
Herrera said an increase from a $50 premium to a $100 premium has pushed some families to forgo coverage, while others have chosen penalties when their premiums were as high as $600 and $700.
“They tell me, ‘I’m not going to stop eating so I can have health insurance,’” Herrera said.
Miami Beach real estate agent Robert Young goes to a health center to stitch together his healthcare while he waits for an option that doesn’t force him to pay the penalty. He paid the minimum penalty for 2014 and will pay again when tax time rolls around next April.
“I had to give up surfing because I can’t afford to break anything else,” said Young who goes to the Miami Beach Community Health Center. There, he pays $35 for a doctor visit and $50 for a dental cleaning. His premiums under Obamacare were priced at about $500 a month. He has been uninsured for a decade.
Young knows the 2016 penalty — $695 or 2.5 percent of household income — will make him reconsider. At one point, he said, the penalty will surpass the premiums and then he will be left with no options — unless something changes on either end.
“Am I going to keep paying penalties? Probably,” said Young, who is in his 50s. “I can’t afford it otherwise.”
A Flaw in the Application
The law offers some ways to reduce the number of consumers paying a penalty, said Justin Giovannelli, a research fellow at Georgetown University’s Health Policy Institute. But the application form still leaves out household expenses when calculating need, an omission that health counselors have said might hurt those who sign up.
The ACA caps the amount a person’s premium can take from their income. The cap is no more than 2 percent of income at 100 to 133 percent of the federal poverty level and can go as high as 9.5 percent of income for those between 300 and 400 percent of the federal poverty level.
“That doesn’t mean that the legal definition of what’s affordable and not doesn’t leave some people paying a lot money,” Giovannelli added.
Those above 400 percent of the federal poverty level don’t get a cap or financial assistance on their premiums.
Still, exemptions for those who suffer hardships or have trouble paying bills have bailed some consumers out of the penalty.
Herrera, of CHI, said he’s been able to file various exemptions for consumers who felt their premiums were too high, stating that other expenses make purchasing healthcare difficult on their budget. Most have been approved, and the penalty waived.
But a health counselor for the Epilepsy Foundation, Juanita Mainster, said the flaw in the law has been a barrier for enrollees: When consumers sign up for health insurance all they are asked to report is their gross income — not expenses.
“I had people that came in and said, ‘Well, I have to pay my car payment and I have to pay whatever other expenses, and why can’t they take that into consideration?’” Mainster said.
That was the concern for Giancarlo Alfano, 26, who had to give up his $70 a month Obamacare plan when he landed a full-time job. The job caused his income to rise and his premium to skyrocket to nearly $400.
For the administrative assistant, who moved to Miami from Venezuela last January, the job was the break he was hoping for — but it came at a price.
“Now that I’m making more money than I was before, I don’t have any benefits, and I don’t think that’s very fair,” Alfano said.
He got married in August, and he and his wife, Paola, decided they could forgo coverage if it meant beginning to make a life together.
“We want to start building up our finances, buying a house, building a family,” Giancarlo Alfano said. “We decided let’s just take the penalty because it’s going to be less expensive than having to pay for insurance.”
A Rainy Day
For the penalty payers, a health scare can change everything.
In the case of Denig, the single mother from Margate, that fear became a reality only months after she decided to risk a year without insurance.
A tumor in her breast led to mammograms, MRIs and, eventually, surgery. Luckily, the growth was benign.
But her rainy day funds — only for emergencies — evaporated.
“The rain came,” Denig said. “And in Florida, it rains a lot.”
She is out of money if another health problem comes her way. Her eldest son, who graduated from high school last year, went to work at a part-time job the next day. The family is unable to pay for college, even though — according to the ACA — Denig can afford hundreds of dollars a month in insurance.
And the ever-growing penalty looms in the horizon.
“Next year, the penalty will be so high it will completely swallow my income tax refund, and what will I do then?” Denig said.
Next year, there won’t be a rainy day fund.
“As the months roll by, I feel the noose tightening around my neck,” she said.
Follow @MHhealth for health news from South Florida and around the nation. This article was produced in collaboration with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.