In 2016, the Affordable Care Act, also known as "Obamacare," had several major changes take effect. The penalties for not maintaining health coverage got much more severe, more employers were required to cover their full-time employees, and premiums increased for many Americans. Here are the details on what happened to Obamacare in 2016 -- and why the biggest change could be right around the corner.

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Stiff penalties for non-compliance

One of the biggest changes to Obamacare in 2016 was an increase in the penalty for going without health coverage. Formally known as the Individual Shared Responsibility fee, this is enforced on taxpayers who can afford insurance but choose not to buy it.

The penalty for not having adequate health coverage in 2015 (unless the household qualified for an exemption) was the greater of 2% of household income or $325 per adult and $162.50 per child (up to a maximum of $975 per family).

For 2016 and 2017, the penalty is the greater of the following:

  • 2.5% of your household income, capped at the national average premium for a "Bronze" health plan sold through the marketplace. This percentage is based on the portion of your household income that's above the tax filing threshold ($10,350 and $20,700 for singles and married couples, respectively, for the 2016 tax year).
  • $695 per adult and $347.50 per child under 18, up to a maximum of $2,085.

If you had health coverage for part of the year, then you'll be fined 1/12 of the annual penalty for each month you didn't have coverage. There is a list of exemptions to the penalty, but if you don't qualify for any, then the cost of going without health insurance just got more expensive.

More employers must provide coverage

A big part of the Affordable Care Act is the requirement of employers of certain sizes to provide coverage for their workers. This employer mandate expanded in 2016.

In 2015, companies with 100 or more full-time equivalent (FTE) employees needed to insure at least 70% of their full-time workers. For 2016, this percentage increased to 95% -- or virtually all their full-time employees.

Midsize businesses with 50 to 99 full-time equivalent employees were not required to insure their workers at all in 2015, but as of 2016 they are required to insure at least 95% of their employees, just like larger employers.

Under the employer mandate, the following conditions apply, just to name a few:

  • Coverage must be offered to dependents up to age 26 (but not to spouses).
  • Employees who work at least 30 hours per week are considered full-time for healthcare purposes.
  • Coverage offered to employees must be "affordable" -- no more than 9.56% of employee household income -- and must cover at least 60% of allowed costs.
  • Employers can be fined for not providing coverage, up to $2,000 per full-time employee.

Higher premiums for some

As my colleague Dan Caplinger wrote in late 2015, several insurers reported financial difficulties associated with participation in Obamacare. Some chose to withdraw, while others requested premium increases.

Overall, the average premium increase for the second-cheapest silver-tiered plan rose more than 10% in 2016. However, most people who receive subsidies for their coverage didn't see any increases at all. Only in five states (Arizona, Hawaii, Minnesota, New Mexico, and Tennessee) did premiums rise after taking tax credits into account.

Effectively, premiums rose in 2016, but the government ended up footing the bill for much of the increase. Premiums are expected to increase further in 2017 -- by a much higher 25% average in the 39 states covered by the Healthcare.gov exchanges.

The biggest change could happen in 2017

President-elect Donald Trump has pledged to repeal the Affordable Care Act, and all of the penalties and taxes that come with it, and to replace it with a much "better" piece of legislation. It's unclear whether Trump will be able to do this as quickly as he promised, or whether any changes will be retroactive to Jan. 1, 2017. However, with a Republican president and a Republican congress, there's a high chance that Obamacare's days are numbered. In other words, the changes discussed here might be small potatoes compared to what's coming just around the corner.

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