Individual Mandate

The Individual Mandate provision of the ACA requires U.S. citizens and legal residents to have qualifying health coverage, beginning January 1, 2014. Qualifying coverage, which must include an “essential health benefits” (EHB) package, is equivalent to the bronze plan, the lowest-end health plan in the state insurance exchanges.

Those without coverage will pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income. The penalty will be phased in according to the following schedule:

  • $95 in 2014, $325 in 2015, and $695 in 2016 for the flat fee or
  • 1.0% of taxable income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income in 2016

Beginning after 2016, the penalty will be increased annually by the cost-of-living adjustment.

Exemptions

Exemptions will be granted for the following:

  • financial hardship
  • religious objections
  • American Indians
  • those without coverage for less than three months
  • undocumented immigrants
  • incarcerated individuals
  • those for whom the lowest cost plan option exceeds 8% of an individual’s income, and
  • those with incomes below the tax filing threshold (in 2009 the threshold for taxpayers under age 65 was $9,350 for singles and $18,700 for couples).

Individuals with the following coverage will also satisfy the requirement:

  • Medicare
  • Medicaid or the Children’s Health Insurance
  • Program (CHIP)
  • TRICARE (for service members, retirees and their families), and
  • the veteran’s health program.

Eligibility process for exemptions

Exchanges are required to use an application established by the U.S. Department of Health and Human Services (HHS) to collect information necessary for determining eligibility for and granting certificates of exemption. In addition, Exchanges are required to provide timely written notice to an applicant of any eligibility determination. In the case of a determination that an applicant is eligible for an exemption, the notification must include the exemption certificate number for the purposes of tax administration.

Verification process related to eligibility for exemptions

Exchanges must undertake a series of steps to determine an applicant’s eligibility for the exemption for which he or she applied. In addition, the rule provides procedures for the Exchange to follow in the event they are unable to verify information necessary to make an eligibility determination for an exemption.

Other coverage that qualifies as minimum essential coverage

The rule provides that the following types of coverage are designated as minimum essential coverage:

  • self-funded student health coverage
  • refugee medical assistance supported by the Administration for Children and Families
  • Medicare advantage plans, and
  • state high-risk pools.

In addition, the HHS may recognize other types of coverage, which are not on the above list, as minimum essential coverage provided that HHS determines the coverage meets certain substantive and procedural requirements.

Also see the Individual Subsidies / Tax Credits page.