Or, The Shared Responsibility Provision
The IRS addresses this provision of the Affordable Care Act (ACA) as follows:
Under the Affordable Care Act, the federal government, state governments, insurers, employers and individuals are given shared responsibility to reform and improve the availability, quality and affordability of health insurance coverage in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have coverage for a minimum set of medical benefits (known as minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.
Q. Who is subject to the individual shared responsibility provision?
A. The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.
Q. When does the individual shared responsibility provision go into effect?
A. The provision goes into effect on Jan. 1, 2014. It applies to each month in the calendar year. The amount of any payment owed takes into account the number of months in a given year an individual is without minimal essential coverage or an exemption.
Minimum essential coverage does not include coverage providing only limited benefits, such as coverage only for vision care or dental care, and Medicaid covering only certain benefits such as family planning, workers’ compensation, or disability policies.
Q. Will I owe a penalty?
A. You will not owe a penalty if:
You are employed and you have an insurance plan with your workplace.
If you purchase a qualifying individual health plan.
You are covered under a government plan, such as Medicare, most Medicaid or CHIP
If you purchase a plan on the Marketplace Exchange in order to use advance premium tax credits. These plans are qualifying and you will not owe a penalty
Q. How much will the penalty cost me?
A. If a person cannot keep minimum essential coverage, the Internal Revenue Service will collect a tax penalty from him or her. The monthly tax penalty is described as 1/12th of the greater of:
For 2014: $95 per uninsured adult in the household (capped at $285 per household) or one percent of the household income over the filing threshold
For 2015: $325 per uninsured adult in the household (capped at $975 per household) or two percent of the household income over the filing threshold
For 2016: $695 per uninsured adult in the household (capped at $2,085 per household) or 2.5 percent of the household income over the filing threshold
The penalty will be half of the amount for people under age 18.
Q. Who will be exempt from a penalty?
A. The IRS will not collect a penalty if you receive the following exemptions:
Religious conscience. You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
Health care sharing ministry. You are a member of a recognized health care sharing ministry.
Indian tribes. You are a member of a federally recognized Indian tribe.
No filing requirement. Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income.
Short coverage gap. You went without coverage for less than three consecutive months during the year.
Hardship. The Health Insurance Marketplace, also known as the Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
Unaffordable coverage options. You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.
Incarceration. You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
Not lawfully present. You are not a U.S. Citizen, a U.S. National or an alien lawfully present in the U.S.
For those seeking an exemption, the Health Insurance Marketplace will be able to provide certificates of exemption for many of the exemption categories. Individuals will also be able to claim certain exemptions for 2014 when they file their federal income tax returns in 2015. Individuals who are not required to file a federal income tax return are automatically exempt and do not need to take any further action to secure an exemption.
October 30, 2013 Update: HHS has not yet made available the certificates of exemption as of this date. This omission is one of the issues being addressed regarding the government website and Marketplace program.
October 28, 2013 Update: Consumers now have until March 31, 2013 (resulting in effective date no later than May 1, 2013) to enroll in coverage and avoid the fine. HHS gave an extension on Monday to correct a penalty situation that it had inadvertently created for those who applied after February 15, 2013,(because the HHS Open Enrollment period did not account for the fact that application dates do not result in an instant coverage date).
Important Update: Recent news reports regarding the delay of some ACA provisions have created confusion about the Individual Mandate. As of September 10, 2013, there is no plan to delay the Individual Mandate and the Department of Health and Human Services is enthusiastically planning for the October 1, 2014 opening of the Health Insurance Marketplace enrollment period. The enrollment period closes on March 31, 2014.
Patient Protection & Affordable Care Act (PPACA) information discussed in communications is most accurate as of this date. The Department of Health & Human Services may amend or change federal regulations at any time.