Healthcare Individual Mandate

The individual mandate in the Affordable Care Act states that if you don’t have health insurance that qualifies as minimum essential coverage, you will have to pay a fine. Many people are concerned about the possibility of this fee, so HealthMarkets has reviewed the most common questions we hear about the individual mandate.

What qualifies as ‘minimum essential coverage’?

The vast majority of health insurance plans qualify as minimum essential coverage. All Marketplace plans or health insurance plans you get through your employer qualify. Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) also provide minimum essential coverage. TRICARE, veterans health care programs, Peace Corps Volunteer plans, and retiree health plans offer minimum essential coverage, as well as self-funded coverage offered to students by universities for years that began on or before December 31, 2014.

What doesn’t qualify as minimum essential coverage?

  • Worker’s compensation
  • Insurance that only covers a specific disease or condition (like vision or dental)
  • Plans that only offer discounts on medical services
  • Temporary health insurance plans

How much will I have to pay?

That depends. You’ll either have to pay a percentage of your household income or a flat fee, whichever is higher. If you didn’t have coverage in 2016, you’ll pay either 2.5% of your yearly household income, or $695 per adult and $347.50 per child.

Using the first method (2.5% of your yearly household income), the maximum you’ll have to pay for 2016 is $2,699, which is the average premium for a bronze plan in the Marketplace. Using the second method (flat fee), the maximum you’ll have to pay is $2,085.

Remember, you don’t get to choose the method to calculate the fee for not having health coverage; it is whichever method is higher. And, the fee goes up with inflation.

What if I can’t or don’t pay the fee?

The fee is paid automatically on the federal income tax return you file for the year you don’t have coverage. You may be preparing to file your 2016 taxes now. If you didn’t have health insurance coverage last year, your fine will be taken out of this tax return. If you don’t have health insurance this year, the fee will be taken out of your 2017 taxes, which are usually filed in 2018.

If your tax refund doesn’t cover the fee, the IRS will hold the fee amount from any future tax refunds.

If you couldn’t get insurance because it was unaffordable based on your income, you may qualify for an exemption from the fee. There are several reasons you may qualify for an exemption from the penalty, including:

  • You were uninsured for less than 3 months of the year, and the rest of the time you were covered.
  • Your income is low enough that you don’t need to file a tax return.
  • You’re a member of a federally recognized tribe (or eligible for services through an Indian Health Services provider), a recognized health care sharing ministry, or a recognized religious sect with religious objections to insurance.
  • You are not lawfully present in the U.S.
  • The lowest-priced coverage for you would cost more than 8% of your annual household income.
  • You have a hardship exemption.

You can complete an application in the Health Insurance Marketplace to find out if you are eligible for an income-based exemption.

What are my next steps?

There are a few steps you can take to make sure that you won’t have to pay the individual mandate’s tax penalty:

  1. Ensure that your coverage meets minimum requirements
  2. Make sure you have held minimum essential coverage for at least 9 months
  3. If you have not held coverage for at least 9 months, check to see if you:
    • Do not need to file a tax return because of your income (and therefore will not pay an income-related penalty) or
    • Qualify for an exemption

If you have any questions about your coverage, feel free to call us at (800) 304-3414.


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