Taxes, Fees & Penalties

The old saying that "there's no such thing as a free lunch" definitely applies to the Affordable Care Act. Given that the monthly payments made by individuals and businesses for health insurance will be going to the private insurance companies, not the U.S. Federal Government, Uncle Sam had to find some way to pay for at least part of the costs to set up the Marketplace, design a fancy website to host it, program all those computers to keep track of who makes what and who has insurance or doesn't, hire thousands of IRS employees to double-check those facts, pay for all of those fancy commercials, ads, and web banners to promote it, and on and on.

The Affordable Care Act comes with a lot of new taxes, fees and penalties designed to fill the hole in the national debt it creates. Many are out of sight of the health insurance buyer, though they certainly affect her or him through higher prices on just about everything "medical". For those interested, we have provided a brief list of some of the biggest ones below.

For individuals and families, however, there are two fees (or "taxes", according to the Supreme Court) that can have a major direct impact on your bank account if you do not play by the rules. These are the Individual Responsibility Payment (variously known as a penalty, a fee, or a tax) for failure to observe the Individual Mandate and the Excise Tax on High-Cost Coverage (the "Cadillac Tax").

About the Individual Responsibility Payment

When you file your Federal Income Taxes each year, you will be required to provide information about your coverage as part of your tax return. If you did not have health insurance, or if you did not have a policy for a period longer than 3 months, the IRS will assess a penalty against your refund, or bill you for the penalty if your refund is less or you did not have a refund. The ACA penalty fee, sometimes called the "individual responsibility payment," will increase every year.  

  • The fee is 2.5 percent of your yearly income, or $695 per adult, whichever is higher.

  • The minimum penalty is adjusted for inflation.

  • The penalty fee for children is half the amount adults are assessed.

If you did not purchase health insurance during open enrollment, or you lost coverage for some reason, Dan Burghardt Insurance is here to help. For a quick quote, contact one of our Health Insurance Specialists at (504) 441-7283 or complete the Online Quote Request form and you will be contacted immediately.

About the Excise Tax on High-Cost Coverage (the "Cadillac Tax")

Granting that this one definitely won't affect nearly the number of people as the first, it is still something to be concerned about if you are a union member with generous health benefits, or a moderately compensated professional or member of executive management. The main concern for those affected is its punitive nature.

Beginning in 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold. The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation). The thresholds increase for individuals in high-risk professions and for employers that have a disproportionately older population.

Other Taxes, Fees, and Penalties

The taxes, fees and penalties listed below probably won't get noticed as much or generate nearly the number of direct complaints, but their total affect on the price of everything from the monthly cost of insurance to spending 15 minutes in a tanning booth is sure to bring forth many a complaint about the continuing increase in the cost of health care.

  • Insurer Fee, amounting to about $68 billion annually

  • Reinsurance Fee, netting $25 billion over three years

  • An Excise Tax of 2.3% on durable medical devices
  • Medicare Tax on Investment Income 3.8% over $200k/$250k

  • Medicare Part A Tax increase of .9% over $200k/$250k

  • 10% Tax on Indoor Tanning Services

  • And many, many more.

For a quick quote, contact one of our Health Insurance Specialists at (504) 441-7283 or complete the Online Quote Request form and you will be contacted immediately