IRS individual mandate regulations updates

IRS individual mandate regulations updates

There have been many questions out there in regards to the individual mandate required under the Affordable Care Act.  The individual mandate is the regulation that requires everyone (with a few exception) to have a health insurance plan that covers the “essential benefits”. If you do not have health insurance you will be charged a tax penalty. At the end of January the IRS and conjunction with the Department of Health and Humans Services provided some updates on the regulations that would be surrounding the individual mandate.

irs individual mandate regulationsBelow are the changes and updates.

The penalty is now called a “shared responsibility payment.”  Because some individual will qualify for exemptions based on various standards, so the name has now changed from a tax penalty.

The regulations provided by the IRS covered the following topics in greater detail.


 What qualifies as minimum essential coverage 

A person will be considered to have minimum “essential coverage” for any month where he or she is legally enrolled in one of the following types of coverage for at least one day:

  • An employer group health plan
  • An individual health insurance policy
  • A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE or veterans coverage
  • Student health coverage
  • Medicare Advantage plan
  • State high risk pool coverage
  • Coverage for non-U.S. citizens provided by another country
  • Refugee medical assistance provided by the Administration for Children and Families
  • Coverage for AmeriCorp volunteers

All the plans listed above will qualify as minimum “essential coverage”, once the requirement above is met, there are no additional coverage requirements that must be met.

Health Insurance Tax Penalties: How will they be Determined and Paid

The first penalties will be due in 2015 for the 2014-year. A penalty will be determined by calculating the greater amount of either a flat dollar amount or set percentage of income. The annual penalties for 2014 through 2016 are phased in over those years, starting in in 2017 the penalties will increase based on the cost of living.

  • 2014: Greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or 1% of income over the tax-filing threshold
  • 2015: Greater of $325 per adult and $162.50 per child under age 18 (maximum of $975 per family) or 2% over the tax-filing threshold
  • 2016: Greater of $695 per adult and $347.50 per child under age 18 (maximum of $2,085 per family) or 2.5% over the tax-filing threshold

If the case where the penalty applies for less than a full calendar year, the penalty will be pro-rate on a monthly basis


Who are the individuals Exempt from Paying the Health Insurance Tax Penalty for Not being insured 

Any individual who falls within one of the scenarios listed below will not have to pay the Health Insurance Tax penalty, if they do not have a health insurance plan with the “essential benefits”

  • If you are an individual who cannot afford coverage. The term unaffordable relates to a person whose contribution toward minimum essential coverage would be greater than 8% of their annual household income. The monthly contributions are calculated at 1/12 the annual household income. This is used to determine if the individual exceed the 8%.
  • If you are an individual taxpayers with income below the tax filing threshold
  • Individuals who qualify for a hardship exemption. This exemption is available to individuals who are not eligible for Medicaid because their state chose not to participate in Medicaid expansion. Or individuals who have another hardship that prevents them from being able to afford coverage.
  • If you are an individuals who have experience a gap in minimum essential coverage of less than 3 consecutive months within one calendar year
  • Members of religious groups that object to coverage on religious principles
  • Members of non-profit religious organizations where members share medical costs. Often referred as Health care sharing ministries.
  • Prison inmates
  • Non U.S. citizens
  • Native American tribe members 

Other exemptions include US citizens residing outside the United States will be exempt if they meet additional requirements such; living abroad for the entirety of a calendar year, residents of U.S. territories (Guam, American Samoa, Northern Mariana Islands, Puerto Rico, and Virgin Islands)

How does an individual file for an exemption ?

There will be various ways and times throughout the year that various individuals will be able to file for an exemption. There will be mostly two avenues to request and exemption. 1) Through the Health Insurance Exchange; these exemption requests will be reviewed by the residing States exchange and the exemption is approved the state exchange will issue an exemption letter in addition to notifying the IRS. 2) Financial exemptions will be claimed during the time and individual will complete their annual tax returns

Exemptions through state exchange will be used by those seeking an exemption for; Religious, hardship,

Exemptions through the IRS will be used by those seeking an exemptions based on;  Those who can not afford coverage, coverage gaps, non-citizens, low household income.

Others who are part of, health care sharing ministries, in prison, Native American tirbe members may apply for an exemption through either IRS or their states exchange.

For the full detail of the document Click here to read the REG-148500-12 FR*

There will be a public hearing scheduled for May 29, 2013, at 10 a.m. to discuss these topics must be received by May 3, 2013.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Sue-Jean Kim or John B. Lovelace, (202) 622-4960; concerning the submission of comments, the public hearing, and to be placed on the building access list to attend the public hearing, Oluwafunmilayo Taylor, (202) 622-7180 (not toll-free numbers).

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