The Affordable Care Act, otherwise known as Obamacare, comes with a litany of requirements that explain the protections and provisions that are set forth by law. One of the most important of these obligations is the individual mandate, which describes the necessary rules that everyone must abide with respect to obtaining healthcare coverage.
The law states that you must have some form of acceptable insurance that qualifies as “minimum sufficient coverage” under the standards set forth by the Affordable Care Act or pay a fine that correlates with the duration of time that you fail to maintain such coverage. That fine is known as the Shared Responsibility Payment and you will be mandated to make such a payment applicable for each month that you remain uninsured. There are exemptions in effect, however, for certain individuals who will not be subject to holding proper coverage or paying the Shared Responsibility Payment.
Defining the Individual Mandate
Under the language of the Affordable Care Act, the Individual Mandate dictates that all U.S. citizens maintain some form of insurance that provides “minimum sufficient coverage”. This includes any policy obtained from the Marketplace, from an employer, or government program.
Qualifying plans would include any private insurance purchased from the Individual Market, employer-sponsored plans along with COBRA or retiree coverage, government-sponsored programs such as Medicare Part A coverage and Medicare Advantage plans, most forms of Medicaid, health coverage administered by the Veterans Administration, coverage provided to Peace Corps volunteers, the Children’s Health Insurance Program (CHIP) coverage, and TRICARE, among others. Keeping any of these types of insurance will qualify under the Affordable Care Act mandates for minimum sufficient coverage.
In order to obtain certain types of coverage you will need to act during an open enrollment period. During that time, you will be able to apply for a new policy or make changes to an existing one that you currently hold. There are certain circumstances in which you may be able to obtain suitable coverage outside of an open enrollment period. These are called “qualifying events”.
Enrolling in a Qualifying Event
In order to be eligible for a qualifying event, you must meet specific criteria. There is a range of possible scenarios which could trigger a special enrollment opportunity. Many of these involve a major life change such as a marriage or divorce, gaining or becoming a dependent on someone else’s taxes, and earning U.S. Citizenship.
Some other examples are if you lose your employer-sponsored coverage or if the benefits are reduced below the standards for minimum essential coverage, if there are errors on your original enrollment that occurred during an open enrollment, or if you move to a new part of the country where different health plan options are available. Anyone who lives in the state of Nevada does not need a qualifying event to enroll for a policy as off-exchange coverage is available all year long. If you feel you are eligible for a qualifying event, then you must produce valid proof of your circumstances in order to be considered under that specific event.
Paying Penalties and Fees Under the Individual Mandate
The Individual Mandate dictates that most Americans maintain adequate health insurance or pay a tax penalty for the time they were uninsured, unless they qualify for an exemption from the mandate. As of January 2014, the Individual Mandate has been in place and is in effect each subsequent year from that point.
Those qualifying citizens who are expected to maintain coverage will be mandated to pay a penalty if they fail to do so. Any applicable penalties are to be paid as part of your Federal Income Tax Return for every month in which you or any family members remain uninsured. The amount you will have to pay is based on your Modified Adjusted Gross Income (MAGI).
The fees have increased since 2014 and may continue to do so beyond 2016. Determining your penalty takes your income, the size of your household, and your coverage into account, which will either result in your fees being a flat dollar amount or a percentage of income above the tax bracket for your current filing status.
There is a ceiling to the amount you will have to pay which is equal to the national average cost of a Bronze health plan being offered in the Marketplace. You will only be responsible for paying the penalty for the months that you or your family members did not have any form of suitable coverage under the law.
For the year 2016, the fee for failing to obtain coverage is $695 for each adult and $347.50 for each child, with a potential cost of $2,085 per family OR you will need to calculate 2.5% of your household income at a tax return level for your filing status – whichever of the two is greater.
Once you determine your fee, you will be asked to submit 1/12 of the total for each full month in which a family member went without coverage or did not hold a qualifying exemption. It is also important to recognize that a full month without coverage encompasses the entirety of the month, as any month where coverage was held for one day or more will not be assessed as part of your penalty.
Eligible Exemptions from the Individual Mandate
Those who have an exemption from the Individual Mandate are not expected to obtain or maintain coverage and will not be subject to applicable penalties. There is a long list of possible exemptions that you could be eligible to receive, but most exemptions will not be granted until an application is filed beforehand.
The most common exemption that most will qualify to receive is the “short coverage gap” which permits a grace period of less than 3 consecutive months without coverage every year. You may only qualify for this exemption if you obtain some form of health insurance. Anyone who has failed to do so for an entire year is ineligible.
Some other exemptions include an exemption from filing taxes due to being below the filing limit, an exemption for those individuals whose available plans cost more than 8% of their total income, and if your current healthcare plan was canceled under the standards of the Affordable Care Act. There are many others, so be sure to check which exemptions, if any, you may qualify for in your area.