Beginning in 2014, the Affordable Care Act (ACA) requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This provision is widely known as the “individual mandate.” If you are covered under a health plan offered by your employer, or if you are currently covered by a government program such as Medicare, you can continue to be covered under those programs and will not be impacted by the individual mandate.
How much will the individual mandate penalty cost me?
The penalty for not obtaining acceptable health insurance coverage under the ACA 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.”
In 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 charged annually but calculated on a monthly basis - 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.
Because this provision has the effect of “requiring” individuals to have coverage, it is often referred to as the “individual mandate.”
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 household (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.
Is there financial assistance available to help me purchase health insurance coverage?
Federal subsidies in the form of premium tax credits and cost-sharing reductions will be available to low-income individuals who purchase health insurance through an Exchange. The Exchanges are scheduled to be operational in 2014, and enrollment began non October 1, 2013.
To be eligible for a premium tax credit, you:
- Must generally have household income for the year between 100 percent and 400 percent of the federal poverty line (FPL) for your family size
- May not be claimed as a tax dependent of another taxpayer
- Must file a joint return, if married
- Must enroll in one or more qualified health plans through an Exchange
- Cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan)
The amount of the premium tax credit varies based on your household income.
Some individuals who are enrolled in coverage through an Exchange may also be eligible for cost-sharing reductions to help them pay their medical expenses.
There are several premium subsidy calculators available online that you can use to predict your health care costs, including this one.
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