At long last, the much-publicized health insurance mandate for individuals went into effect on January 1. Now, less than a month later, the IRS has issued new proposed regulations governing the penalties for noncompliance. The nation‘s tax-collection agency is tasked with enforcing the rules.
Under the Patient Protection and Affordable Care Act (PPACA) – the massive 2010 legislation often referred to as “Obamacare” – individuals are required to acquire “minimum essential health insurance” if they don’t already have such coverage.
For purposes of the individual health insurance mandate, “minimum essential coverage” is generally defined as:
- Coverage under certain government-sponsored plans.
- Employer-sponsored plans for employees.
- Plans in the individual marketplace.
- Grandfathered health insurance plans.
- Any other health benefits coverage, such as a state health benefits risk pool, recognized by the Secretary of Health and Human Services.
The penalty for failing to have minimum essential coverage is relatively mild at first, but will be amped up in later years.
For 2014, the penalty is equal to the greater of $95 per person ($47.50 per child under the age of 18), or 1 percent of household income. The maximum penalty for a family is $285. In 2015, the fee increases to $325 per person ($162.50 per child), up to a family maximum of $975, or 2 percent of household income. Then, in 2016, it leaps to $695 per person, with a family maximum of $2,085, or 2.5 percent of household income. After 2016, the fees will be indexed for inflation.
If someone is uninsured for only part of the year, one-twelfth of the yearly penalty applies to each month without coverage. An individual who is uninsured for less than three months doesn’t have to make a payment.
Technically, an individual has until the end of the current enrollment period, which is March 31, 2014, to avoid a penalty. If you sign up before the enrollment period ends, you won’t have to make a payment for any month before your coverage began. For example, if you enroll in a state marketplace plan on March 31, your coverage begins on May 1, and you aren’t liable for a penalty for any of the previous months of 2014.
In the new proposed regulations, the IRS addresses several “loopholes” in the law. For instance, limited coverage is allowed through certain government-sponsored programs, such as Medicaid-based programs, as well as two military health programs. Also, individuals are exempted from the Obamacare mandate if they can’t afford minimum essential coverage, or the plan’s costs exceed 8 percent of the individual’s household income for 2014. Furthermore, hardship exemptions may be available to individuals who are unable to attain coverage.
The IRS is inviting public comment on the new regulations. Final comments may be made as late as April 28.