Individual Mandate

Starting on January 1, 2014, the Affordable Care Act (ACA) requires most individuals to have minimum essential coverage for themselves and their dependents or otherwise pay a penalty.

Individual Mandate

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Starting on January 1, 2014, the Affordable Care Act (ACA) requires most individuals to have minimum essential coverage for themselves and their dependents or otherwise pay a penalty.  Some individuals will be exempt from the requirement while others may be eligible for subsidies to help them pay for coverage.

What is Minimum Essential Coverage?

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

  • Employer-sponsored coverage (including COBRA and retiree coverage)
  • Coverage purchased in the individual market, including through the public Exchange
  • A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE or veterans coverage
  • Student health coverage
  • State high risk pool coverage
  • Coverage for AmeriCorp volunteers.

What are the Penalties?

Penalties for 2014 were due when individuals filed their 2014 tax returns in 2015.  The penalty is determined by calculating the greater of either a flat dollar amount or a set percentage of income.  The annual penalties for 2014 through 2016 are as follows:

  • 2014:  Greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or one percent of income over the tax-filing threshold.
  • 2015:  Greater of $325 per adult and $162.50 per child under age 18 (maximum of $975 per family) or two percent over the tax-filing threshold.
  • 2016:  Greater of $695 per adult and $347.50 per child under age 18 (maximum of $2,085 per family) or two and one-half percent over the tax-filing threshold.

Beginning in 2017, the penalties will increase based on the cost of living.  If the penalty applies for less than a full calendar year, the penalty will be one-twelfth of the annual amount per month without coverage.

Exemptions from the Penalties

Individuals who meet the following criteria are exempt from the penalty:

  • Individuals who cannot afford coverage.  Coverage is considered unaffordable if the individual’s contribution is more than eight percent of his or her household income.
  • Taxpayers with incomes below the tax filing threshold (i.e., the amount required to file a federal tax return – $10,000 for individuals for 2013 and $20,000 for married filing jointly in 2013).
  • Individuals who qualify for one of several hardship exemptions.
  • Individuals who have a gap in coverage of less than three consecutive months in a calendar year.
  • Members of religious groups that object to coverage on religious principles and members of Native American tribes.
  • Individuals in prison and individuals who are not U.S. citizens.

Transition Relief for 2014

The Internal Revenue Service provided transition relief for individuals who were eligible to enroll in a non-calendar year employer-sponsored group health plan.  Those individuals who were eligible to enroll in the plan but did not enroll for the 2013-2014 plan year were not subject to a penalty in 2014.  This relief was effective from January 1, 2014 through the month in which the 2013-2014 plan year ends.

 

 

Additional Information
Questions and Answers on the Individual Mandate
The Internal Revenue Service has provided a series of questions and answers on the Individual Mandate provision.