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Obamacare Is Here: Pay the Premium or Pay the Penalty

By Hal M. Bundrick

NEW YORK (MainStreet) -- It is the rise of Obamacare-ageddon. Businesses are already cutting workers' hours and trimming payrolls as the greatly debated and highly anticipated Affordable Care Act becomes a reality October 1. State health care insurance exchanges will open and employers will be required to notify their workforces of available options. Nearly 12 million Americans that don't currently have health insurance will have three months to make a decision or pay a penalty. Let the havoc begin.

"Many, but by no means all, uninsured individuals are American adults under the age of 30, who mostly enjoy the robust good health that comes with youth," says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards. "Medical costs, let alone health insurance, are often pretty low on their list of financial concerns. Facing the choice to get insurance or pay a penalty, they may resort to simple math and conclude that $95 is a lot more affordable than the $3,000 or $4,000 that is currently being estimated as the cost of the lowest level of insurance coverage available on the state exchanges."

However, Blayney advises Americans to consider several factors before deciding to pay the federal penalty and forego health insurance:

  • Rising penalties for having no insurance - In 2014, uninsured Americans will be required to obtain health insurance or pay a penalty equal to the greater of $95 per adult and $47.50 per child, or 1% of family income. In 2015, the penalty rises to the greater of $325 per adult (half as much for each child) or 2% of income. In 2016 and beyond, the penalties rise even further.
  • The risk of incurring huge medical costs due to an accident - Being young and healthy does not vaccinate you from the kind of risk that can leave you and your family destitute.
  • Limited access to quality medical care when you do need it - While the Affordable Care Act will not close down access to emergency rooms when an uninsured individual needs immediate care, getting treatment from other physicians for chronic conditions is going to be a lot more difficult. Some providers, upon learning you are uninsured, may simply decline you as a patient.
  • The increased likelihood that you will neglect the routine, preventative procedures that can keep you healthy - It stands to reason that if you are unwilling to pay for insurance, you'll probably be averse to the high cost of an annual check-up or routine procedures.

"The likely reality is that it's going to cost more for the uninsured to get health care coverage under the Affordable Care Act, relative to what it costs now," says Blayney. "But the financial math needs to factor in not just the hard, out-of-pocket costs today, but the potential costs of being without insurance."

HealthCare.gov provides additional information regarding the Affordable Care Act, including links to state health care exchange websites - or the federal exchange if your state has not yet adopted its own.

--Written by Hal M. Bundrick for MainStreet

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