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The 5 W’s of the Affordable Care Act Individual Mandate

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To shed light on the Affordable Care Act individual mandate certain questions need to be answered. They pertain to what, who and when. More specifically, they are: What is the affordable care act individual mandate? When did the mandate go into effect? Who must comply with it? What are the consequences of not complying? When will the consequences apply? Okay. Let’s cut to the chase. 

What is the Affordable Care Act individual mandate? affordable care act individual mandate

The Affordable Care Act individual mandate is the requirement for most residents of the United States to have health insurance which provides the essential health benefits as stated in the Affordable Care Act or face a penalty.

When did the mandate go into effect?

Individuals who were not exempt must have enrolled in an Affordable Care Act insurance plan beginning on January 1, 2014.

Who must purchase ACC insurance?

This question is best answered by discussing who is exempt from having to comply. Every citizen and legal resident must purchase health insurance except for the following:

1.   Individuals insured for a whole year through one or a combination of the following insurance plans:

  • Medicare
  • Medicaid
  • Children’s Health Insurance Program
  • TRICARE
  • Veteran’s Health Program
  • A plan offered by an employer
  • A previously purchased health plan of at least the bronze level
  • A grandfathered health plan

2.   Undocumented immigrants

3.   Members of an Indian tribe

4.   Incarcerated individuals

5.   Individuals who belong to a religious group that is opposed to accepting benefits from a health insurance policy based on beliefs of that religion

6.   Individuals whose household income is less than the threshold for filing a federal income tax return

7.   Certain low-income individuals who cannot afford coverage due to hardship, or that live in states that opted out of Medicaid expansion 

What is the ACA individual mandate penalty?

The Affordable Care Act individual mandate penalty is a fee in the form of a tax that one pays for not having ACA qualifying health insurance.  It is proportionate to the number of months in a year of not having the coverage.

In 2014 the penalty was a tax of $95 per adult and $47.50 per child (up to a maximum of $285 for a family household) or 1% of the family household income (whichever was greater). The maximum penalty that one could owe based on percentage of income was $9800.

In 2015 the penalty was $325 per adult and $162.50 per child (up to a maximum of $975 for a family household) or 2% of the family household income (whichever was greater).  The maximum penalty that one could owe based on percentage of income was $12,500.

In 2016 the penalty was $695 per adult and $347 per child (up to $2085 for a family household) or 2.5% of the household income (whichever was greater).  The maximum penalty that one could owe based on percentage of income was $13,000.

In 2017 the penalty was $695 per adult and $347 per child (up to $2085 for a family household) or 2.5% of the household income (whichever was greater). The maximum penalty that one could owe based on percentage of income was $13,100.

In 2018 the penalty is expected to be a tax of $695 per adult and $347.50 per child (up to a maximum of $2,085 for a family household) or 2.5% of the family household income (whichever is greater).  This is not definite at this point in time however, pending actions by Congress regarding the tax reform bill.

When is the penalty assessed and due?

The penalty is assessed once a person who is not exempt has been without qualifying insurance for three months out of the year. The penalty is calculated based on the number of months that a person has been without insurance. For example, if you have been without insurance for six months out of the year that is half the year. Accordingly, your tax penalty would be 50% of the standard amount.  The fee is to be paid at the time of filing of a federal tax return for the year in which coverage was lacking. 

 

 

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