Final Regulations for ACA’s Individual Mandate Released

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August 30th, 2013

ACA Individual Mandate

With the opening of the ACA’s health exchanges quickly approaching, the Obama administration has finalized the regulations for its Individual Mandate - officially labeled the Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage.

The mandate acts as a provision to force US citizens to purchase health insurance, or be subject to penalties. Its aim is to ensure that healthcare funding is not being spent on individuals abusing “free” or uncompensated care. After its implementation in the beginning of 2014, officials hope to see health insurance risk pools stabilized by healthy individuals entering the market and offsetting the expenditures for individuals frequently requiring medical services.

Accompanying the mandate is a series of regulations and penalties. US taxpayers will be penalized if they fail to purchase health insurance that meets the minimum essential coverage for both themselves and all registered dependents. The ACA has indicated that all forms of coverage purchased through the exchanges will qualify as meeting the essential benefits coverage as outlined in the ACA.

The penalties are to be introduced in the following phases and increase yearly for the first three years.

  • 2014: A fine of $95 dollars per person or 1% of taxable income.
  • 2015: A fine of $325 per person or 2% of taxable income.
  • 2016: A fine of $695 per person or 2.5% of taxable income.

Some have questioned the impact of the fines, as some individual would rather pay the penalties instead of purchasing over priced insurance plans.

The mandate also contains a number of provisions highlighting which individuals may be exempt from partaking in the exchanges without being penalized. Below are a few of the more common exemptions:

  1. Taxpayers may be exempt if MEC is unaffordable, meaning they cannot purchase coverage for 8% or less of their adjusted income and must apply for a hardship exemption.
  2. Taxpayers may be exempt if their household income is below the tax-filing threshold.
  3. Taxpayers may apply for a short-coverage gap exemption, once they have not had coverage for small intervals of time.
  4. A religious conscience exemption will void all taxpayers from partaking if they belong to a religious group or sect that does not file taxes, such as the Amish community. Individuals of recognized Native American tribes and reservations may also be exempt.

In terms of collecting unpaid penalties, the IRS has indicated that it can only do so through withholding tax reimbursement claims. Individuals who fail to pay their penalties and do not file a tax return could possibly avoid paying the mandate fine.

Besides shedding some light on a provision of the ACA that has been highly debated, the Individual Mandate regulations provides taxpayers with a greater understanding of their role in the new health exchanges opening this October.


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