There’s an upside and a downside to being an independent massage therapist.
Upside: no boss. You work for yourself. Downside: no boss. There’s no employer to provide health insurance.
"So then the Affordable Care Act was coming around," says Rachelle Lowe, a masseuse in Concord, "what I found was it wasn’t as affordable as I thought. And the deductibles are outrageous, so at this time I’m still not insured."
April 15 is Tax Day. And this is the first year some people will pay a tax penalty for not having insurance under the Affordable Care Act. Rachelle Lowe says she can't afford insurance, so she's opting to pay the penalty.
Instead of paying premiums, Lowe has decided to deposit cash in a savings account in case she has an accident; like she did last fall, when she got a nasty gash on her face.
"It didn’t need stitches, it just got superglued," Lowe says. "And I thought - in those first few moments when I got hurt - about not going, and taking care of it myself. But I couldn’t."
After a discount from the hospital, the bill was $500. So far Lowe's saving money by not having insurance. But it’s a big gamble.
And when she filled out her tax forms she couldn’t check the box that asks about health insurance. So she’s paying a penalty, somewhere around $200. This year the law requires Lowe to pay $95 or one percent of her income, whichever is greater.
But for people like Lowe - and there’s still maybe 100,000 in New Hampshire without insurance - so far it’s as though the consumer protections and the subsidized insurance the law provides don’t exist.
Helping Lowe figure this all out is her accountant, Robin Wells. Wells is hearing from other clients who can’t afford insurance too.
"They’re frustrated with still how expensive it is. It’s just the penalty they’re feeling it’s not fair," she says.
Wells also points out there are other tax implications with the ACA.
For example, people who bought subsidized insurance on the federal exchange – but who underestimated their income when they bought those plans – may have to pay some of those subsidies back to Uncle Sam.
Nationally, H&R Block says 52 percent of its customers who bought plans on the exchange are paying back part of their subsidy. Halfway through this tax season, the country’s largest tax preparation company says the average subsidy payback its clients are facing is $530.
Robin Wells, the CPA, says it’s confusing. So, on a scale of totally informed to completely bewildered, how educated does she say her clients are on how the Affordable Care Act will affect their taxes this year?
"I don’t think anyone but CPAs are really well-educated on how it affects it," Wells says. "I took an eight-hour class just on the tax implications of this this year. If my clients get a refund, they don’t even care about what they’re paying. If they owe money, then I go through the explanation of why."
Wells says that’s when people have an emotional response – when they have to pay. And, in a sense, that’s by design.
Penalty Or Premium?
The 21 different taxes and subsidies in the Affordable Care Act are a series of financial and psychological levers. Ellen Meara, an economist at the Dartmouth Institute, says those carrots and sticks force you to answer a question: Do I want to pay tax penalty, and hope for the best with my health, or a premium, and at least get to go to the doctor?
"In some sense what the act does is it changes the norms," says Meara, "and there is sort of a behavioral component. If the norm is that everybody has health insurance coverage, then people start taking it more seriously. And the penalty is one way of making that more salient."
And it’ll get more salient as the tax penalty ratchets up over three years. It will cap in 2016 at 2.5 percent of household income.
Rachelle Lowe says somewhere along the way, she’ll be pushed to buy a plan.
"It’s the one thing I’m working towards," Lowe says. "Certainly I have home insurance on my house, I have car insurance for my car. My son has health insurance through his father, which is great. But I’d like to have health insurance as well."
Lowe hopes to have enough money saved to buy health insurance by the end of the year. If she does, she’s likely to get another tax penalty next year, but not on her 2016 taxes.