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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

Individual Mandate Under ACA

Annie L. Mach, Analyst in Health Care Financing

March 6, 2014

http://www.fas.org/sgp/crs/misc/R41331.pdf

[full-text, 16 pages]

 

Summary

Beginning in 2014, ACA requires most individuals to maintain health insurance coverage or

otherwise pay a penalty. Specifically, most individuals will be required to maintain minimum

essential coverage, which is a term defined in ACA and its implementing regulations and includes

most private and public coverage (e.g., employer-sponsored coverage, individual coverage,

Medicare, and Medicaid, among others). Some individuals will be exempt from the mandate and

the penalty, while others may receive financial assistance to help them pay for the cost of health

insurance coverage and the costs associated with using health care services.

 

Individuals who do not maintain minimum essential coverage and are not exempt from the

mandate will have to pay a penalty for each month of noncompliance with the mandate. The

penalty is the greater of a flat dollar amount or a percentage of applicable income. In 2014, the

annual penalty is the greater of $95 or 1% of applicable income; the penalty increases in 2015 and

2016 and is adjusted for inflation thereafter. The penalty will be collected through federal income

tax returns. The Internal Revenue Service (IRS) can attempt to collect any owed penalties by

reducing the amount of an individual’s tax refund; however, individuals who fail to pay the

penalty will not be subject to any criminal prosecution or penalty for such failure. The Secretary

of the Treasury cannot file notice of lien or file a levy on any property for a taxpayer who does

not pay the penalty.

 

Certain individuals will be exempt from the individual mandate and the penalty. For example,

individuals with qualifying religious exemptions and those whose household income is below the

filing threshold for federal income taxes will not be subject to the penalty. ACA allows the

Secretary of Health and Human Services (HHS) to grant hardship exemptions from the penalty to

anyone determined to have suffered a hardship with respect to the capability to obtain coverage.

The Secretary of HHS has identified a number of different circumstances that would allow

individuals to receive a hardship exemption, including an individual not being eligible for

Medicaid based on a state’s decision not to carry out the ACA expansion and financial or

domestic circumstances that prevent an individual from obtaining coverage (e.g., eviction or

recent experience of domestic violence).

 

ACA includes several reporting requirements designed, in part, to assist individuals in providing

evidence of having met the mandate. Every person (including employers, insurers, and

government programs) that provides minimum essential coverage to any individual must provide

a return to the IRS that includes information about the individual’s health insurance coverage.

On March 5, 2014, the House of Representatives passed H.R. 4118, Suspending the Individual

Mandate Penalty Law Equals (SIMPLE) Fairness Act. H.R. 4118 provides that individuals do not

have to pay an individual mandate penalty for any month prior to January 1, 2015, effectively

delaying implementation of the individual mandate penalty and maintaining the initial penalty

levels until 2015.

 

Contents

Individual Mandate .......................................................................................................................... 1

Minimum Essential Coverage ................................................................................................... 1

Penalty ....................................................................................................................................... 1

Illustrative Individual Mandate Penalties ............................................................................ 2

Exemptions ................................................................................................................................ 3

Claiming an Exemption ....................................................................................................... 6

Failure to Pay Penalty ................................................................................................................ 8

Potential Financial Assistance ......................................................................................................... 8

Reporting Minimum Essential Coverage ......................................................................................... 8

 

Tables

Table 1. Individual Mandate Exemptions under ACA ..................................................................... 7

Table A-1. Types of Health Insurance Coverage as they Relate to the Definition of

Minimum Essential Coverage and the Individual Mandate Penalty in 2014 .............................. 10

 

Appendixes

Appendix A. Health Insurance Coverage and the Individual Mandate .......................................... 10

 

Contacts

Author Contact Information........................................................................................................... 13

Acknowledgments ......................................................................................................................... 13

 

 

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