(Bloomberg) — The health care system created by the Patient Protection and Affordable Care Act (PPACA) — Obamacare — is about to test how well people respond to economic incentives.
About 3.5 million Americans who are uninsured today could get health coverage in 2016 for less in out-of-pocket premium costs than what they’ll pay in individual mandate penalties under PPACA, according to a new analysis.
That’s because the fines for skipping health insurance will rise next year. On average, people currently uninsured could have to pay $969 in 2016, up from $661 this year, according to the report by the Kaiser Family Foundation. The penalties are rising to 2.5 percent of income or a flat dollar amount of $695 per adult, whichever is higher. For most people who owe penalties, 2.5 percent of income will be higher.
That’s compared with 2 percent of income, or $325 per adult, this year.
See also: IRS is PPACA enforcer, lawyer says
About 11 million people are eligible for coverage but haven’t bought it. The big question is whether the steeper fines will prod more of them into the market. “That’s where the mandate matters the most, because it aims to bring healthy people into the risk pool, which will help keep premiums down,” says Larry Levitt, senior vice president at the Kaiser Family Foundation and one of the report’s authors.
The new insurance markets created by PPACA need healthy people to enroll in order to be sustainable. Last month the largest U.S. health insurer, UnitedHealth Group (NYSE:UNH), said it might withdraw from the exchange system entirely after next year because of mounting losses.