Brace Yourself: Health Insurance Is About to Get More Costly

A lesser-known section of the tax overhaul killed a key provision of Obamacare. Anyone who buys health insurance after this year could feel the effect.

Brace Yourself: Health Insurance Is About to Get More Costly Photo by zenstock /

The recent tax code overhaul will impact more than taxes. It will also affect health insurance — including insurance rates.

This stems from the eliminating the fee charged to people who are required to purchase health insurance coverage under Obamacare, but who choose not to do so.

The individual shared responsibility payment

Under the Affordable Care Act, folks who can afford to buy health insurance generally are required to purchase coverage or else pay what’s technically known as an “individual shared responsibility payment.” It’s also referred to as a “penalty” or “fine.”

This penalty is due when affected folks file their federal income tax return.

In November, the nonpartisan Congressional Budget Office and the nonpartisan Joint Committee on Taxation for the impact of repealing the Obamacare provision that requires most folks to have coverage. It was predicted that the estimated effects would include that:

  • The number of people with health insurance coverage would decrease by 4 million in 2019 and 13 million in 2027, mainly because healthier people would be less likely to buy insurance.
  • Federal budget deficits would decrease by about $338 billion between 2018 and 2027, as the government would be spending less money on subsidies for people who obtain coverage.
  • Health insurance markets for individuals would continue to be stable in “almost all” areas of the country over the next decade.
  • The average premiums in those markets would increase by about 10 percent in most years over the next decade, mainly because fewer healthier people — who tend to cost insurance companies less money — would buy insurance.

At the time, the CBO and JCT also estimated that the effects of repealing the penalty would be “very similar” to those outlined above for repealing the mandate itself. To be clear, the tax overhaul repealed the penalty rather than the mandate itself.

What it means for you

The elimination of the individual shared responsibility payment does not take effect until 2019. So, you can’t escape the penalty just yet, including when you file taxes this year.

In the future, however, if you’re required to have health insurance under Obamacare but don’t buy it, you’ll owe $0 to the IRS because of it.

Of course, if you buy insurance through an individual market rather than through an employer in the future, it may cost you more money, based on the CBO/JCT report.

Beyond that, many experts and media prognosticators have already forecast the effects of killing the individual shared responsibility payment. But no one can say for sure.

As founder Stacy Johnson writes about the overhaul as a whole in “6 Important Take-Aways From the Tax Reform Effort“:

“Fact is, until the law has been in effect for a period of time, we can’t be certain what the effects will be.”

What’s your take on the elimination of the penalty? Sound off below or on .

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More


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