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HealthCare.gov warns Obamacare laggards: Get off the dime!

Obamacare advocates for months have been using a carrot to try to get people to enroll—but now they're pulling out a big, pricey stick as Monday's signup deadline quickly approaches.

The federal Obamacare marketplace this week sent an email warning of financial penalties "of up to 1% of your income" to people who have applied for insurance from that site, HealthCare.gov, but not yet enrolled.

"You only have a few days left to get coverage for 2014," the email said. "Remember, if you don't sign up by March 31st, you can't get covered until next year," the email continues. "If you can afford to pay for insurance and choose not to have it, you could pay a fee of up to 1% of your income on your 2014 taxes."

It is the first time a HealthCare.gov email to would-be enrollees highlighted the penalty.

"We continue to remind all consumers, including those who have started the process, that the deadline to sign up for coverage is March 31 and the steps they need to take to complete enrollment this year," said Aaron Albright, a spokesman for the Health and Human Services Department.

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HHS, which operates HealthCare.gov, is contacting people in the exchange's system via emails and calls every two days to prompt them about what they need to complete their enrollment. Such an explicit threat about the potential fine is a marked change.

In the past, Obama administration and Obamacare proponents have almost exclusively relied on citing the benefits of affordable health coverage as the primary reason to enroll in Obamacare plans sold on the federal exchange, as well as on 15 others run by individual states and the District of Columbia. Among those benefits is the availability of government subsidies to low- and moderate-income people to help them buy exchange-sold plans.

A woman sits with an insurance agent as she inquires about purchasing health insurance under the Affordable Care Act at a kiosk at the Mall of the Americas on Dec. 22, 2013 in Miami.
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A woman sits with an insurance agent as she inquires about purchasing health insurance under the Affordable Care Act at a kiosk at the Mall of the Americas on Dec. 22, 2013 in Miami.

Despite those enticements, only about 5 million people have officially enrolled in exchange-sold policies, leaving tens of millions of people uninsured.

Under the Affordable Care Act, nearly all Americans must have some form of health coverage—such as employer-provided insurance, individually purchased policies including Obamacare plans, Medicare or Medicaid—by Monday or pay a penalty that is either $95 or 1 percent of taxable income per individual, whichever is greater.

While Monday remains the official deadline, HHS officials Wednesday said there would be a grace period of unspecified length for online enrollment if the applicant claimed to have encountered technical and other problems while "in line" on HealthCare.gov.

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There remains widespread confusion among uninsured people about both that deadline, and the penalty, known as the individual mandate.

A Kaiser Family Foundation survey released Wednesday found that 60 percent of uninsured people did not know when the deadline is. An Urban Institute report in February noted that nearly 58 percent of uninsured adults were unsure of how much they might have to pay in penalties if they failed to obtain coverage.

Tax preparation firms reported that many of their clients this tax season mistakenly believe that the most they will pay in penalty is $95, as opposed to the 1 percent of income that is likely to be the penalty for most people.

The penalty is scheduled to escalate significantly in coming years.

In 2015, fine rises to $325 per individual, or 2 percent of taxable income, whichever is greater. In 2016, it jumps to $695 per person or 2.5 percent of income, whichever is greater. After that, the penalty will be calculated on annual cost-of-living adjustments by the government.

In a report Thursday, the price comparison website NerdWallet said that while many people will go without insurance coverage in 2014 because they will decide that paying the penalty is "affordable," the costs of avoiding coverage over the course of a lifetime would be in the tens of thousands of dollars, if not more.

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NerdWallet's analysis used the "flat-fee" penalty, rather than the percentage of income fee that will apply to most people.

If a 27-year-old chooses to go without coverage until qualifying for Medicare at age 65, the person would face a minimum of $36,556 in penalties over the years, based on projected future inflation rates of 2 percent, NerdWallet said. A family of four that went without insurance would pay a minimum of $109,668 in total tax penalties, the site said. The total lifetime penalties would amount to $42,077 for an individual and $126,231 for a family of four based on historical cost-of-living data, which assumes a 2.78 percent annual cost of living adjustment.

"Combined with the financial risk of going uninsured, we predict that the tax penalty will lead many more Americans to purchase insurance in coming years," Nerdwallet said.

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