A significant portion of the American public does not carry health insurance, currently approximately 50 million people. These individuals fall into two major groups — those who cannot afford it, and those who can afford it, but decline to purchase health insurance. Tax payers pick up the tab for patients who can afford health insurance but forego the purchase; the Individual Mandate puts an end to this practice.
Beginning in 2014, the Patient Protection and Affordable Care Act (PPCA) includes a mandate for certain individuals to have health insurance or potentially pay a penalty for noncompliance. Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Some individuals will be exempt from the mandate or the penalty, while others may be given financial assistance to help them pay for the cost of health insurance. Individuals and families who are already covered through employer-based coverage will pay no penalty; studies show that 73% of Americans fall under this category. According to PPACA §§1501 and 1010; §1002 of Reconciliation Bill, individuals and families who do not carry employer-based coverage, are exempt from the penalty if they fall under any of the classifications listed below:
- individuals with a religious conscience exemption (applies only to certain faiths);
- incarcerated individuals;
- undocumented aliens;
- individuals who cannot afford coverage (i.e. required contribution exceeds 8% of household income);
- individuals whose coverage lapsed for less than 3 consecutive months;
- individuals in a hardship situation (as defined by the Secretary of Dept. of Health & Human Services (HHS) in the chart below);
- individuals with income below the tax filing threshold;
- individuals who qualify for Medicaid or Medicare;
- members of Indian Tribes.
2010 National Poverty Level – Hardship Exemption
The above individuals and families may qualify for Medicaid or Medicare, and would be exempt from the penalty stipulated by the individual mandate. Higher income earners would also be exempt from the penalty if premiums for minimum coverage exceed 8% of gross income. Even in cases where premiums fall within this designated “affordable” range, they may be exempt from the penalty if hardship conditions exist. Individuals and families who continue to tread water with their mortgages, outstanding credit card, student loan, and other indebtedness may be exempt from the penalty if a premium rate of less than 8% of income creates undue hardship. Some qualify for subsidies or cost sharing that would reduce the burden of health insurance premiums significantly.
|UNINSURED, WITH||EXEMPT FROM PENALTY IF
MINIMUM ESSENTIAL COVERAGE EXCEEDS
|YEARLY EARNINGS||YEARLY PREMIUM||MONTHLY EQUIVALENT||WEEKLY EQUIVALENT|
|Compiled by VeracityStew.com|
A study conducted by the Urban Institute and funded by the Robert Wood Johnson Foundation, determined the following:
- 6% of the population will be eligible for subsidies under ACA reform;
- 33% of people without health insurance (about 6% of the population) will be exempt from individual mandate because of low income or local premiums are too high for their income.
- 3% of U.S. population (non-Medicare) subject to the individual mandate will have to purchase affordable un-subsidized coverage through state exchanges.
- Approximately 6% of the population will actually have to purchase insurance or face a penalty, because they currently have no coverage.
- 17% of U.S. population subject to the individual mandate has health insurance through public program: Medicaid, CHIP
- 4% of U.S. population subject to the individual mandate will be eligible for Medicaid under reform expansion.
What about the young and healthy? POLITICO explains that while the young and healthy will be required to have health insurance, the law has some incentives for them. Young adults under age 26 can stay on their parents’ plans, if they don’t have an alternative through a job. People under age 30 can buy a lower cost “catastrophic plan” through state exchanges, which means they’d be covered in the event they were hit by the proverbial bus.
What does the penalty look like? Whether you choose to call it a tax or a penalty, the above exemptions are the same; the penalty for noncompliance is as follows:
The penalty is the greater of:
- For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold,
- For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold, and
- For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold.
- For individuals under 18 years old, the applicable per person penalty is one-half of the amounts listed above.
- The penalty will be paid as a federal liability on income tax returns and is enforced by the Treasury. Individuals who fail to pay the penalty will not be subject to criminal penalties, liens or levies.
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