Details of The Individual Mandate Under the Affordable Care Act



Beginning January 1, 2014, the Affordable Care Act will require most individuals to have “minimum essential (health) coverage” for themselves and their dependents or pay a penalty.  The coverage requirement and penalty are collectively known as the “Individual Mandate.” Some individuals and their dependents may qualify for an exemption to the mandate, and therefore not have to carry minimum essential coverage or pay a penalty.

The Internal Revenue Service and Department of Health and Human Services recently issued proposed regulations regarding:

●   Coverage that will qualify as minimum essential coverage

●   When and how penalties will be determined and paid

●   Individuals exempt from the penalty for not carrying minimum essential coverage

●   How individuals can apply for an exemption


1.  Coverage that will Qualify as Minimum Essential Coverage

An individual will be considered to have minimum essential coverage for any month in which he or she is enrolled in any of the following plans for at least one day during that month:

●   Employer group health plan

●   Individual health insurance policy

●   Student health coverage

●   State high risk pool coverage

●   Medicare Advantage Plan

●   Government plan such as Medicare, Medicaid, TRICARE or veterans coverage

●   Coverage for non-U.S. citizens provided by another country

●   Refugee medical assistance provided by the ‘Administration for Children and Families’

●   Coverage for AmeriCorps volunteers

2.  When and How Penalties will be Determined and Paid

The first penalties will be due with 2014 tax returns filed in 2015, and be determined by calculating the greater of a flat dollar amount or a set percentage of income. The annual penalties for 2014 through 2016 are outlined below.  Beginning in 2017, penalties will increase each year by a cost-of-living adjustment.

●   2014: The greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or 1% of income over the tax-filing threshold.

●   2015: The greater of $325 per adult and $162.50 per child under age 18 (maximum of $975 per family) or 2% of income over the tax-filing threshold.

●   2016: The greater of $695 per adult and $347.50 per child under age 18 (maximum of $2,085 per family) or 2.5% of income over the tax-filing threshold.

3.  Individuals Exempt from the Penalty for Not Carrying Minimum Essential Coverage

The following individuals will be exempt from paying a penalty if they do not carry minimum essential coverage:

●   Individuals who cannot afford coverage. Coverage is considered unaffordable if an individual’s contribution toward minimum essential coverage is more than 8% of his or her annual household income. Monthly contributions are calculated at 1/12 the annual household income to determine if they exceed 8%.

●   Taxpayers with income below the tax-filing threshold.

●   Individuals who qualify for a hardship exemption. A hardship exemption is available to individuals who would otherwise be eligible for Medicaid under the expanded eligibility of provisions of ACA, but who are not eligible because their state chose not to expand Medicaid.  Also eligible for exemption will be individuals with a personal or financial hardship that prevents them from being able to afford coverage.

●   Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year.

●   Member of religious groups who object to coverage on religious principles.

●   Members of health care sharing ministries, i.e., non-profit religious organizations whose members share medical costs.

●   Individuals in prison.

●   Individuals who are not U.S. citizens.

●   Members of Native American tribes.

U.S. citizens living in a foreign country will be exempt if they meet certain requirements, such as residing abroad for an entire calendar year.  Residents of the U.S. territories of Guam, American Samoa, Northern Mariana Islands, Puerto Rico, and the Virgin Islands will automatically be deemed to have minimum essential coverage, and therefore be exempt from penalties.

4.  How Individuals Can Apply for an Exemption

Depending on the type of exemption, individuals can apply to their state’s Health Care Exchange or to the IRS when filing their tax return. If an application to an Exchange is approved, the Exchange will issue a certificate of exemption and notify the IRS.

●   Religious and hardship exemptions are only available by applying to an Exchange.

●   Individuals who cannot afford coverage, who experience short-term coverage gaps, who are not U.S. citizens, or who have household income below the tax-filing threshold may apply for an exemption through the IRS when filing their federal tax return.

●   Members of a health care sharing ministry, individuals in prison, and members of Native American Tribes may apply for an exemption through an Exchange or through the IRS when filing their federal tax return.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: