Health Care Reform: What Does the Individual Mandate Mean to Me?
Guest post by Todd McLaughlin, Advisor at Apex benefits
A key provision of the Affordable Care Act (ACA) is the “individual mandate,” which requires most individuals to purchase health insurance coverage or pay a penalty.
What is the individual mandate?
The ACA requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty.
Because this provision has the effect of “requiring” individuals to have coverage, it is often referred to as the “individual mandate.”
How much will the individual mandate penalty cost me?
The penalty for not obtaining acceptable health insurance coverage will be phased in over a three-year period. The amount of the penalty is the greater of two amounts—the “flat dollar amount” and “percentage of income amount.”
For 2014, the penalty will start at $95 per person or up to 1 percent of income. For 2015, the penalty increases to $325 per person or up to 2 percent of income. In 2016 and after, the penalty increases to $695 per person or up to 2.5 percent of income.
“Income” for this purpose is your household income minus your exemption (or exemptions for a married couple) and standard deductions. Families will pay half the penalty amount for children.
The penalty is calculated on a monthly basis, and will be assessed for each month in which you go without coverage. There is no penalty for a single lapse in coverage lasting less than three months in a year.
Who is exempt from the individual mandate?
You may be exempt from the individual mandate penalty if you:
- Cannot afford coverage (that is, a required contribution for coverage would cost more than 8 percent of your household income)
- Have income below the federal income tax filing threshold
- Are not a citizen, national or lawfully present in the United States
- Experience a gap in coverage for less than a continuous three-month period
- Qualify as a religious conscience objector
- Are a member of a health care sharing ministry
- Are a member of certain Indian tribes
- Are given a hardship exemption by HHS
- Are incarcerated
If you are eligible for an exemption for any day of a month, the IRS has said you will be treated as exempt for the entire month.
How will the penalty be collected?
Starting in 2015, everyone who files a federal tax return for the previous year will be required to report the following:
- Which members of your (including yourself) are exempt from the individual mandate
- Whether each person who is not exempt had insurance coverage for that year
You will owe a penalty for each non-exempt family member who doesn’t have coverage. If you and your spouse file a joint return, you are jointly liable for the penalties that apply to either or both of you.
If you are eligible to claim a dependent, you will be responsible for reporting and paying the penalty for that dependent.
For more information about the Marketplace or for help selecting and individual insurance plan contact Todd at email@example.com or 317-806-5167.