By Jeff Smedsrud
I work as a health reform advocate, entrepreneur and strategist.

In 2017 approximately 600,000 more Americans are exempt from paying a penalty for not buying health insurance because rising health insurance premiums are growing much, much faster than wages and household income.

If the least expensive plan available under the Affordable Care Act (ACA) costs more than 8.13% of your household income, you don’t pay a penalty if you refuse to buy it. The penalty is the greater of 2.5% of your taxable income, or $695 per adult, and $347.50 per child.

According to data scientist April Seifert, the average Bronze plan in 2016 for a family of four was about $8,600. In 2017, it will be more than $9,500. She estimates that this means about seven million more Americans would be exempt from buying health insurance in 2017 – assuming that everyone buys in the individual market. But not everyone does. Most experts believe it is in the range of 7%-9% percent that buy their own insurance. That creates a total of somewhere between 490,000 and 630,000 American families that are newly exempt.

When The Affordable Care Act was approved in 2010 it created a series of exemptions for certain individuals who would not be required to pay a tax penalty (the so-called individual mandate) if they did not purchase health insurance. These exemptions are given for a variety of reasons: certain life events, group membership, health coverage of financial status, being a member of a native American tribe, or being enrolled in a faith-based health sharing ministry.

One of the more obscure items was this: If the lowest cost Bronze-level plan available to you through the marketplace was 8% of your household income, you were exempt from paying the tax penalty for not buying a qualified health plan. The total cost had to be more than 8%, including any premium tax credit you would qualify for if you enrolled in that plan. It applied to everybody on your tax return who didn’t have coverage in 2017.

In 2010 the notion that health insurance – even with tiny house-size benefits and Mt. Everest-size deductibles – would ever cost 8% of household income was very remote. Maybe for those eligible for subsidies, we thought, but not for the upper middle class.

Forward to 2017. The individual market is in near collapse. Prices rose in 2014, and even more in 2015, and 2016, and in 2017 current estimates say the average price increase will be 24% percent, according to insurance industry expert Charles Gaba. For some, prices will go up 50% or more.

Suddenly, the cost of buying health insurance is more than 8% of taxable income for many people.

Why does this matter?

1.      It is useful to remind people what the ACA allows, and does not allow. It clearly gives people above a certain income get a pass when it comes to making health insurance a requirement.

2.      Because some of these 600,000 newly exempt don’t have to buy coverage, some of them simply won’t – especially the healthiest

3.      When fewer and fewer healthy people buy health insurance in the individual market, the risk pool gets sicker and sicker. Insurance costs will keep going up.

4.      As insurance costs go up and up, more and more people will be exempt from buying it. The risk pool gets sicker and sicker. And rates go up even more.

A “death spiral” is an insurance term for a sinking ship. At a certain point, there is a mathematical certainty that a ship will sink. The individual health insurance market isn’t at this point – yet. But it is getting close.

What is the solution?

Congress and the next President really need to reach a bi-partisan consensus on how to right the ship – closing loopholes, tweaking eligibility for subsidies by creating a longer sliding scale, allowing for plans with less benefits which will cost less. There are many small steps that could be taken.

Like them or loathe them, short term medical insurance plans are an option for all people. They cost less, only cover you for a specific period of time, and don’t provide as much protection. And so are fixed indemnity plans – the kind of insurance that pays a cash reimbursement for certain procedures based on a set schedule.

As consumers, we need to know all of our rights. Those who make too much to be eligible for a premium subsidy, but make too little to reasonably believe that having a comprehensive health insurance is affordable, don’t have to buy it. There are other options.

You are in charge of your choices.