The Individual Mandate
The Individual Shared
Responsibility Payment, often called the Individual Mandate, was part of the
ACA. It was a tax penalty for individuals who did not maintain minimum
essential coverage throughout the year. When individuals filed their federal
income taxes, they would be asked questions about their health insurance
coverage for the year. If they did not meet the ACA requirements, they would be
charged the penalty.
For 2017, the fee was $695
per adult and $347.50 per child under the age of 18, or 2.5 percent of the
yearly household income. If people had coverage for part of the year, the
penalty would be reduced to show this. People who had a gap in coverage that
only lasted for a month or two did not have to pay a fee. Additionally, some
people qualified for exemptions based on financial status or life events.
People who had no health insurance
and did not qualify for an exemption would have to pay the fee. Additionally,
people who had coverage that did not meet the requirements for minimum
essential coverage would have to pay. This could include coverage that only
provided vision or dental benefits, coverage that was only for a specific
condition or plans that only offered discounts on medical services.
Many other plans are required
to provide minimum essential coverage. If you have coverage from one of these
for the year, you didn’t have to worry about a penalty. These plans include:
·
Plans
purchased on the Health Insurance Marketplace
·
Plans
purchased outside the Health Insurance Marketplace that meet the standards of
qualified health plans
·
Job-based
plans, which includes COBRA coverage and retiree plans
·
“Grandfathered”
health plans obtained before March 23, 2010
·
Medicare
Part A or Part C (but not Medicare Part B on its own)
·
Many health
plans available through government programs, such as Medicaid, CHIP and TRICARE
The Repeal of the Individual
Mandate
Some people who decide not to
purchase health insurance do so because they cannot afford coverage. Critics of
the individual mandate have argued that it is unfair to fine people who are
already struggling financially.
Although some people support
the intention behind the individual mandate, people generally do not enjoy being
forced to pay penalties. A 2017 poll from the Associate Press and NORC Center
for Public Affairs Research found that the individual mandate was most
unpopular part of the ACA.
The ACA, including the
individual mandate, was passed under the Obama administration. The political
situation changed when Trump took office. Although the rest of the ACA remains
law in the United States, the Individual Shared Responsibility Payment was
repealed as part of the Tax Cuts and Jobs Act in late 2017.
However, the repeal did not
go into effect immediately. People who did not maintain minimum essential
coverage during 2018 could still face a fee in 2019, when they filed their 2018
taxes.
Starting for the year 2019,
however, there is no fee. Not on the federal level, anyway. States can create
their own laws and charge their own individual mandate penalties. These fees
would be part of the state income tax filings, not the federal income tax
filings.
California’s New Individual
Mandate
California has recently
passed new legislature establishing a Minimum Essential Coverage Individual
Mandate for the state.
A University of California
study estimates that between 150,000 and 450,000 additional Californians would
lack health insurance in 2020 due to the repeal of the federal individual
mandate penalty. Reduced enrollment could result in higher premiums for those
who remain covered. The Congressional Budget Office estimates that the lack of
a penalty could cause premiums in the individual market to be 10 percent
higher. To stop this from happening, some states, including California, have
been looking at a state-level replacement for the federal penalty.
Senate Bill 78 was approved
by Governor Gavin Newsom on June 27, 2019. It makes many changes to health care
laws in the state. Among other things, it requires California residents to
maintain minimum essential coverage for each month beginning on January 1,
2020. Applicable spouses and dependents must also maintain coverage.
Exemptions will be made for
individuals based on certain hardships or religious conscience. A fee, called
the Individual Shared Responsibility Penalty, will be imposed on individuals
who do not maintain the required coverage and who do not qualify for an
exemption.
California taxpayers will be
required to verify coverage for the year. Any penalties will be calculated and
paid as part of the California individual tax return.
The Timeline for Federal and
State Penalties
Some people owed a federal
Individual Shared Responsibility Penalty in 2019 when they filed their federal
taxes for 2018. However, no federal penalty will be due when people file their
taxes in 2020 for 2019.
The new California law does
not go into effect until the year 2020. Starting in January 2020, California
residents must maintain minimum essential coverage for each month.
Obtaining Coverage
To avoid the Individual
Shared Responsibility Penalty, and to ensure that you are protected in case you
experience an illness or injury, it’s important to enroll in a health plan that
provides minimum essential coverage. If you cannot find a suitable policy
through an employer, a government-run program or an employer, you can purchase
coverage on your own. A licensed insurance agent can guide you through the
process.
Click here for a California health insurance quote.
Sources
·
https://www.healthcare.gov/fees/fee-for-not-being-covered/
·
https://www.healthcare.gov/health-coverage-exemptions/exemptions-from-the-fee/
·
https://www.healthcare.gov/fees/plans-that-count-as-coverage/
·
apnorc.org/projects/Pages/HTML%20Reports/many-want-changes-to-the-health-care-law-but-few-support-its-immediate-repeal-issue-brief.aspx
·
http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB78
·
https://www.ftb.ca.gov/tax-pros/law/legislation/2019-2020/SB78.pdf
https://canpweb.org/events/lobby-day/lobby-day-resources/ab-414-fact-sheet/