The Supreme Court upheld the Affordable Care Act on June 29, 2012 which is the law that is the central basis of Health Care Reform, and will bring the most profound changes to the United States Health Care system. The most debated piece of the law was the individual mandate portion. The individual mandate requires everyone to have insurance or pay a penalty. That penalty was later reclassified as a tax, sometimes referred to as Obamacare Taxes. The federal government does not have the right to penalize individuals for not purchasing something they are offering. In order to ensure everyone adhere to the individual mandate, a shared responsibility fee will be imposed on those that opt out of the exchange, or employer provided health insurance. Below is quick guideline, and calculation on what the fees will be based on the 2012 federal poverty guideline. Please Note; this article solely focuses on the Health Insurance Tax, not the subsidies that will be provided in addition to the tax. This article is one half of the equation. There are many individuals and groups that will be eligible for Medicaid, as well as receive a tax credit to purchase insurance based on their annual gross income.
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. This term is often referred to as the Obamacare tax, and the individual mandate. Starting in 2014, the individual shared responsibility provision calls for each person to have minimum essential health coverage (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.
The Obamacare tax provision applies to individuals of all ages, including those under 18 with a few exception. In the case of married adults, the adult or married couple claims a child or another person as a dependent for federal income tax purposes will be responsible for making the payment if the dependent does not have coverage or an exemption.
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, an individual can potential go three month without coverage before being fine
Below is a list of what is considered minimal essential Coverage:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
- Medicare Part A coverage and Medicare Advantage plans
- Most Medicaid coverage
- Children’s Health Insurance Program (CHIP) coverage
- Certain types of veterans health coverage administered by the Veterans Administration
- Coverage provided to Peace Corps volunteers
- Coverage under the Nonappropriated Fund Health Benefit Program
- Refugee Medical Assistance supported by the Administration for Children and Families
- Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
- State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)
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.
You are able to get an exemption from the Individual responsibility requirement if you meet any of the following items listed below.
- 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. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).
- 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 8% 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.
Filing your Taxes
The individual shared responsibility or Obamacare tax provision goes into effect in 2014. You will not have to account for coverage or exemptions or to make any payments until you file your 2014 federal income tax return in 2015. Information will be made available later about how the income tax return will take account of coverage and exemptions. Insurers will be required to provide everyone that they cover each year with information that will help them demonstrate they had coverage beginning with the 2015 tax year. For those who are subject to financial challenges The IRS according to their website routinely works with taxpayers who owe amounts they cannot afford to pay. The law prohibits the IRS from using liens or levies to collect any payment you owe related to the individual responsibility provision, if you, your spouse or a dependent included on your tax return does not have minimum essential coverage. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund you may be due.