Estimate: 16% fewer people had to pay Individual Mandate this year!

Over at Investor's Business Daily, Jed Graham has crunched some IRS numbers to determine just how many people ended up paying the ACA's dreaded "Shared Responsibility" mandate penalty this year. It's a pretty negative piece, as you'd expect, but I'm mostly interested in the actual numbers, of course:

Yet the IRS Taxpayer Advocate Service included some preliminary statistics on 2016 ObamaCare mandate payments, officially called the Individual Shared Responsibility Payment, when it issued its below-the-radar annual tax season review on July 7. As of April 30, 5.6 million tax returns included mandate payments averaging $442 per return, compared with 6.6 million tax forms including average payments of $190 at the same point in 2015.

More recent data from the IRS wrapping the past tax year show that the final tally for 2015 ObamaCare Mandate fines included payments on 8.1 million tax returns averaging $210 for a total of $1.7 billion.

If the final stats for 2016 reflect a similar increase after April due to filings past the initial deadline, that would mean ObamaCare individual mandate payments on 6.8 million tax forms in 2016, averaging $489. Some share of those tax returns will include fines for more than one adult or a parent and child, just as ObamaCare exchange applications often seek coverage for more than one individual. A conservative estimate of less than 1.2 penalties per return yields a rough estimate of 8 million people paying the fine this year.

OK, so the Bad News headline, of course, is "ObamaCare Individual Mandate Fine Hit 8 Million People This Year". Fair enough.

However, there's a different way of looking at this, using the exact same data (remember, the penalty is paid for not having ACA-compliant coverage the previous year, not the current one):

• In 2014, 8.1 million households* had to pay an average of $210 apiece in mandate penalties ($1.7 billion total)
• In 2015, 6.8 million households* had to pay an average of $489 apiece in mandate penalties ($3.3 billion total)

*(Technically, it's "tax returns" not "households"; this includes married couples filing separately and so forth, so it's not quite equal to the number of "households" but close enough.)

Using Grahams conservative 1.2x people per return estimate yields 9.7 million people in 2014 and about 8.2 million this year. If you use the average number of people per household in the U.S. (2.54), these numbers are much higher: 20.5 million and 17.2 million respectively, but the proportions are the same either way.

In other words, a more positive way of looking at this is that about 16% fewer people ended up having to pay the penalty for 2015 than for 2014. If the same thing happens this year, it should be down to 5.7 million tax returns next spring and so on, though of course there's no way of knowing if that will happen.

Graham assumes that pretty much all of these people deliberately chose to pay the penalty rather than enroll in compliant coverage (either on exchange, off exchange or via a workplace offer), deciding that it was still better to shell out around $500 than to sign up for a policy they felt was unaffordable. I'm sure many, possibly most, of these folks fall into this category; the subsidies definitely need to be beefed up and reconfigured, the "family gap" needs to be closed, and the definition of "affordable" group coverage offers needs to be retooled.

On the other hand, I also suspect that a lot of these people simply didn't have any idea that they would have to pay the fee (or thought that it was still a nominal $95/person this year, as it was last year). The Kaiser Family Foundation tracking polls keep showing over and over again that even 6 years after the ACA was signed, huge numbers of the uninsured still have no clue about some of the basic tenets of the law, including things like the deadlines for signing up, whether they qualify for subsidies or not, and yes, how much the Individual Mandate penalty is (or even that there is a penalty at all, which I find stunning given that people have been complaining about that more than any other aspect of the law since day 1).

In the spring of 2015, there were so many people supposedly caught unawares about the $95/person (or 1% of income) penalty for 2014 that the HHS Dept. along with most of the state exchanges created an additional "SEP" (Special Enrollment Period) just for them. However, only around 214,000 people took advantage of it; the rest either chose to pay the fine or never heard about the 2nd chance to sign up.

This was a one-time offer, however; last year HHS did not allow an "#ACATaxTime" SEP, so anyone who got hit with the $325 fee for 2015 had to eat it and was hopefully informed that the penalty was gonna shoot up one more time.

Therefore, for the record:

• If you fail to have ACA-compliant coverage for all 12 months of 2016, in April 2017 you'll owe either:
  • $695 per person ($347.50 per child), up to $2,085 at most; or
  • 2.5% of your household income, up to the national average price of the lowest-cost Bronze plan in your area.

• If you fail to have ACA-compliant coverage for all 12 months of 2017, in April 2018 the penalty will be the same, although after that I believe it goes up slightly each year based on inflation.