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What Happens If You Cannot Afford Health Insurance After the Affordable Care Act Comes into Effect?

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For the past few decades, health insurance costs have been rising at an unsustainable pace. Since 2000, costs for basic healthcare services have also risen at an alarming rate. These increases routinely outpace the rate of inflation by a wide margin. Despite efforts to bring down both types of costs in recent years, policymakers and healthcare professionals are unable to agree on a suitable solution to the problem.

This is not for lack of trying. After its 2009 passage, the Affordable Care Act was heralded as a major breakthrough in the fight to control health insurance costs. With the law's future all but assured thanks to a landmark Supreme Court ruling, it's now fair to ask how it will impact the lives of everyday Americans. It's too early to tell whether it will succeed in its stated aim of controlling the growth of healthcare costs. However, there are a few new rights and responsibilities for healthcare consumers to process and remember during the coming years.

First, the Affordable Care Act offers some protections for low-income individuals and families. Since the law compels most Americans to purchase health insurance coverage, it's only natural that it contains a safety net for those who can't afford to do so. Single taxpayers who earn less than four times the federal poverty wage are eligible for tax credits to offset their health insurance costs. These are designed to cover some of the costs associated with any health insurance policy that costs more than about 7.5 percent of the policyholder's annual earnings. In other words, a wage-earner whose health insurance policy costs 9 percent of his or her total annual income would enjoy a tax credit equal to 1.5 percent of his or her total annual income.

The Affordable Care Act also provides protections for those who would prefer not to purchase health insurance. The law levies a "penalty tax" for this purpose. Although this penalty tax is designed to mirror the average annual cost of a health insurance policy, the correlation is not exact. In fact, it appears that the value of the penalty tax in the earliest years of the Affordable Care Act's existence will be considerably lower than the value of a corresponding health insurance policy. It's not yet clear whether the tax will increase to match the current market rates for health insurance. If it stays at its current levels, it will present an attractive option to those who lack health insurance.