The individual mandate is probably the most vilified part of the Affordable Care Act (ACA). The goal of the mandate was to push people to maintain health coverage.
Mandate is gone or maybe not
January 01, 2019 — The federal mandate is no longer in effect.
♦ States can have their own mandate.
Several states have adopted their own mandates with some assessing tax penalties. These include:
- District of Columbia
- New Jersey
- Rhode Island
Vermont has a mandate but has not yet imposed a tax penalty for not having coverage. Other states are considering individual mandates.
♦ The ACA mandate was a requirement that everyone who can afford it must purchase health insurance to provide at least a minimal level of healthcare coverage. Failing to buy insurance could result in having to pay a penalty.
The ACA mandate was intended to help stabilize the market. And to encourages people to avoid skimpy products that provide little coverage but consider financial risk. Individual states are now left with finding their own way.
ACA mandate has two parts
The Affordable Care Act, commonly called Obamacare, requires (mandates) everyone to have health insurance.
• Part 1 — The responsibility to have health insurance. This responsibility is referred to as a shared responsibility mandate.
• Part 2 — The responsibility to pay a tax penalty if you do not have health insurance or a valid reason for not buying health insurance. This responsibility is called the individual shared responsibility payment.
At the end of 2017, President Trump signed a bill that repealed the tax penalty.
♦ The bill did not eliminate that part of the law that actually says everyone is required to have health insurance (Part 1).
What this means is that even though the mandate is technically still in place there is no longer a penalty if no one complies.
♦ This point is the foundation of a lawsuit filed in February 2018 by 18 GOP attorney generals and 2 GOP governors to invalidate the entire law. The U.S. Supreme Court heard oral arguments on November 10th.
Several of the justices sounded like they had little taste for kicking 20 million Americans off their health insurance during a pandemic.
♦ June 17, 2021, the Supreme Court, on a 7-to-2 vote, turned aside the latest effort by Republicans to kill the healthcare law.
Not everyone is required
Some groups that are exempt from this requirement include:
• Members of Recognized Religious Sects or Divisions
• Members of Health Care Sharing Ministries
• Incarcerated Individuals
State-based individual mandates will be replacing the federal mandate.
Early efforts at designing state-level mandates have been using the Affordable Care Act as a model. State-based mandates will have exemptions available but they may be customized by the states.
• Massachusetts had a mandate in place before the ACA. The District of Columbia and New Jersey scrambled to put one together to start in 2019.
• Vermont passed legislation for a mandate to take effect in 2020 but they have not decided on a tax penalty..
• Maryland considered an individual mandate but lawmakers decided for now to see if a voluntary approach would work.
• Hawaii and Connecticut considered a mandate in 2018 but nothing was passed. The subject appears shelved for the time being.
♦ With state-based mandates taking hold and with many modeled after the ACA, the requirements and exemptions provided by the ACA will continue to be explained here.
Affordable Care Act - Mandate
Individuals are required to maintain Minimum Essential Coverage (MEC) for themselves and their dependents to avoid the individual mandate penalty. As the name implies, it is coverage that provides a minimal level of benefits.
An individual with Minimum Essential Coverage runs a great risk of having high healthcare expenses. Still, MEC plans are considered better than no insurance at all.
Read more about what qualifies as Minimum Essential Coverage.
Exemptions are available based on a number of circumstances, including certain hardships, some life events, health coverage or financial status, and membership in some groups.
You claim most coverage exemptions on your federal tax return. Some require you to fill out and mail an application to the Marketplace.
Hardships are life situations that keep you from getting health insurance. To learn more about hardship exemptions and what qualifies visit Hardship Exemptions.
♦ Even though the mandate's penalty has been zeroed out, hardship exemptions still exist.
Anyone older than 30 and wishing to buy catastrophic health insurance will still need to request a hardship exemptions before they can purchase this type of insurance.
Sometimes people have gaps in their health insurance, like when they change jobs. The law allows for certain Coverage Exemptions so people do not have to pay a penalty.
I am not a U.S. citizen
All residents of the U.S., including non-citizens, are required to have health insurance coverage unless they qualify for an exemption.
In general, anyone who is “lawfully present” in the U.S. must have at least Minimum Essential Coverage. This includes individuals who are green card holders, refugees, and persons granted asylum.
I am a U.S. citizens but living abroad?
All U.S. citizens are subject to the mandate.
However, if you are not physically present in the United States for a minimum of 330 full days or are resident of a foreign country for an entire tax year you are considered to have Minimum Essential Coverage for that year.
You would need to report this when you file Federal taxes.
What if I am over 65?
If you are over 65, and qualify for Medicare then you would need to enroll in Medicare rather than a Marketplace plan, unless you have insurance through employment or retiree health benefits.
Medicare is not part of the Marketplaces.
If you do not qualify for Medicare or do not have other coverage then you must purchase Minimum Essential Coverage or pay a penalty. You should visit the Marketplace handling your state to see if you are eligible for a premium tax credit to help pay for coverage.
Medicare consists of two primary parts
♦ Part A (Hospitalization Insurance)
♦ Part B (Medical Insurance)
If you have Part A you are considered covered under the health care law and do not need a Marketplace plan.
♦ Having only Medicare Part B (Medical Insurance) doesn’t meet this requirement.
Short coverage gap
You pay a penalty only for the months you did not have coverage. Coverage for even one day in a month qualifies that month as having coverage and you would not have a penalty for that month.
You are allowed short gaps in coverage where you do not have to pay a penalty. This is called a short coverage gap exemption.
The short coverage gap exemption is limited to no more than two consecutive months. If you have three consecutive months without coverage than none of the months without coverage would be treated as a short coverage gap.
If two months are to qualify as a short coverage gap, at some time during the third month you must have coverage even if for one day.
♦ If you had more than one short coverage gap during the year, you would be exempt only for the month(s) in the first gap.
If you had coverage for even one day in a month that month is considered as having coverage and you would not have a penalty for that month.
This is a confusing subject for sure. Learn more ... Coverage Exemptions
What is the penalty?
If you can afford health insurance but choose not to buy it, you must pay a fee or penalty as it sometime called.
The IRS calls the penalty a Shared Responsibility Payment.
The penalty has been increasing each year. It can be quite costly to not buy health insurance.
♦ Congress eliminated this penalty starting in 2019. Meaning the requirement to have insurance remains for 2018 along with the penalty.