If you're one of the roughly 30 million Americans without health insurance, 2016 may be the year your tax penalty finally breaks the bank. Also referred to as the "individual mandate" and "insurance tax," the health insurance penalty is a tax fee that's levied if you failed to secure health insurance throughout the year. Here's everything you need to know about the health insurance penalty in 2016, and how you may be able to avoid it. The Penalty Increase Schedule The health insurance penalty was calibrated to gradually ramp up to its highest rate throughout 2014 and 2015. Now that 2016 has arrived, the maximum penalty is in force. If you spend all of 2016 without health insurance, you'll now owe a penalty that's the greater of either 2.5 percent of your yearly household income, or an amount equal to the total yearly premium for an average bronze-level plan, which is calculated to be $695 for a single adult in 2016. The penalty will rise with inflation from 2017 onward. The percentage penalty is calculated using only the portion of your income that is above the minimum threshold of $10,150. The penalty will also be adjusted proportionally if you had insurance for any portion of the year. What the Health Insurance Penalty Means Now In previous years, the penalty was less than the average cost of a bronze-level plan, so it was legitimately possible to save some money by choosing to pay the penalty instead of securing insurance. However, now that the penalty has reached full force, it is exactly as costly as the price of purchasing the cheapest insurance. In short, if you don't buy an insurance plan in 2016 you'll effectively be forced to pay for one anyway via the penalty. It's now officially a better choice to simply buy the cheapest insurance plan, so at least you have access to the coverage in an emergency. How to Avoid the Health Insurance Penalty There are a variety of circumstances that might help you qualify for an exemption from the health insurance penalty. The specifics can vary, so it's safest to visit the federal health exchange (or your state's exchange) and run the health insurance exemption tool to see if you qualify. These are examples of typical qualifying circumstances: —You've already secured a "grandfathered" plan that was not purchased through a health exchange. —Securing the cheapest insurance would cost more than 8 percent of your yearly household income. —You were denied Medicaid in a state that rejected the Medicaid expansion. —You did not have health insurance for three or fewer months during the calendar year.