If You Can’t Afford Health Insurance, Are You Required to Buy It?

Since the late 2000s, health insurance has been a hot topic of conversation. Even as the insurance industry has been subjected to a rigorous examination from every possible angle, the legislative fight to reform the provision of this type of insurance has become a political "lightning rod" for politically-savvy citizens. Meanwhile, many politicians' careers have been launched or reshaped by their stances on so-called healthcare reform.

The political healthcare reform movement culminated with the 2009 passage of the Affordable Care Act. Prior to the act's passage, between 40 and 50 million Americans lacked any form of health insurance coverage. Most of these individuals were low-income workers who couldn't procure insurance coverage through their employers. Many earned too much money to qualify for Medicaid coverage and failed to meet certain eligibility requirements for Medicare.

Likewise, millions of folks who could afford to purchase health insurance coverage through their employers or on the open market found themselves in dire financial straits before the act's passage. In 2012, average out-of-pocket health insurance costs for individual policyholders exceeded $4,000 per year. For the typical family of four, these costs exceeded $15,000 per year.

While it's too early to assess the effects of the Affordable Care Act on health insurance premiums, one of the law's signature features is now set in stone: Beginning in 2014, individuals who previously lacked health insurance may purchase it at a reduced rate. Through a tool known as the "individual mandate," the government may now compel its citizens to purchase health insurance coverage. In addition, most businesses with more than 50 full-time employees will be required to provide group coverage to these full-timers. If businesses or individuals choose not to purchase health insurance coverage, they may be subject to an annual fine.

The individual mandate contains provisions that may help low-income policyholders afford their premium payments. Individual earners with incomes below 400 percent of the federally-set "poverty level" may be eligible for tax credits that can offset the cost of their annual insurance premiums. Families with combined incomes of below 400 percent of the poverty level will also be eligible for subsidies under this plan. In a related provision, the Affordable Care Act caps out-of-pocket healthcare-related expenses for most policyholders at about $3,000. Although this figure may rise in response to cost-of-living adjustments, it is likely to remain significantly lower than the pre-reform out-of-pocket cost of health coverage.

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