Photo: Associated Press

They may not be crunching all the numbers associated with health insurance, but folks whose incomes are three to four times the federal poverty level may be doing enough math to decide they’d rather pay the penalty for not having coverage than pay the premiums required to have exchange coverage.

Avalere released an analysis of the pay-vs.-penalty scenario established by the Patient Protection and Affordable Care Act, and theorized that one reason individuals with certain incomes continue to resist purchasing coverage is that the mandate’s going-bare penalty is substantially lower than annual premiums for insurance.

Avalere notes that this sort of decision making is flawed, since it doesn’t take into account the savings those with insurance may realize if they do require medical care. But particularly with those in their 20s, paying the penalty instead of buying coverage is a choice many are making.

“Penalties associated with the individual mandate, which grow in 2015, might be too low to attract enrollment, particularly among middle-income, healthy individuals,” Avalere said. “Earlier this week, the Department of Health and Human Services (HHS) announced that 68,000 people enrolled in exchange coverage through HealthCare.gov as part of a special enrollment period for individuals paying the individual mandate penalty on their 2014 tax filings. That lackluster uptake of the special enrollment period is driven, in part, because for most people individual mandate penalties are much lower than actual costs of coverage.”

Even subsidized exchange policies will cost many who make three, four and five times the federal poverty level much more than the penalty for noncompliance.

For instance, a 27-year-old who earns three, four or five times the federal poverty level would “save” about $1,600 by paying the penalty rather than the premium. 

A 50-year-old would save far more: between $2,000 and $3,000 a year. However, as Avalere notes, many 50-year-olds understand the value of having insurance.

“Insurance through exchanges is a good deal for individuals who are heavily subsidized, especially as the individual mandate penalty increases,” said Caroline Pearson, senior vice president at Avalere. “While the incremental cost of insurance becomes less significant as the mandate penalty grows, individuals earning more than double the poverty level may continue to forego coverage since paying the fine is still much more affordable than purchasing insurance.”