2015 Individual Mandate Exceptions & Penalties
Who: Every individual not otherwise exempted from the PPACA individual mandate (Also called the “Shared Responsibility Payment.” Guidance is to assist those preparing and filing federal taxes.
When: Penalties effective 1/1/2015. Guidelines provided in July, 2014 in IRS publication 5172.
What: The July 2014 IRS guideline clarifies the exceptions and provides the penalty amounts that apply to 2015.
Executive Summary: Since January 1, 2014 PPACA required everyone to: (1) have qualifying health insurance (minimum essential coverage) for each month of the year, (2) have an exemption, or (3) make an individual shared responsibility payment when filing his or her federal income tax return. The IRS guideline clarifies the exceptions and provides the penalty amounts that apply to 2015.
1. Minimum essential coverage: Includes the following:
Eligible employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage.
Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace.
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
Most types of TRICARE coverage under chapter 55 of title 10 of the United States Code
Coverage provided to Peace Corps volunteers
Coverage under the Non-appropriated 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)
Other coverage recognized by the Secretary of HHS as minimum essential coverage
2. Exceptions: There are NO TAX PENALTIES for being without health insurance if you:
Are part of a religion opposed to acceptance of benefits from a health insurance policy, or
Are a member of a Health Care Sharing Ministry, or
Are an undocumented immigrant, or
Are incarcerated, or
Are a member of an Indian tribe, or
Have income below the 138% of the federal poverty guidelines and are ineligible for Medicaid because the state in which you reside has not expanded eligibility, or
Have a family income below the threshold for filing a tax return, or
Have to pay more than 8% of your income for health insurance, after taking into account any employer contributions to tax credits, or
Meet other hardship standards.
According to the Congressional Budget Office and the Joint Commission on Taxes approximately 23 million uninsureds in 2016 will qualify for one or more of the above exemptions. An additional 7 million may be granted hardship exemptions.
In addition, there is NO TAX PENALTY if you had insurance, lost it, and secured coverage again providing the gap in insurance was less than three consecutive months.
3. 2015 Penalties: In 2015 the penalty for not having qualified health insurance (also called minimum essential coverage) is the greater of:
a. $325 per adult and $162.50 per child (up to $925 per family), or
b. 2.0% of the Family Income.
Family income is defined as household income in excess of the filing threshold. Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the incomes of all of your dependents who are required to file tax returns. Tax return filing threshold is the amount of gross income an individual of your age and with your filing status (e.g., single, married filing jointly, head of household) must make to be required to file a tax return.
Actions Required: Tax filers and preparers should review the relevant IRS publications to determine whether or not they may owe a penalty that is to be paid at the time of tax filing. You may want to consult a tax expert, seek assistance from your employer, broker, lawyer, or a government health insurance navigator.
The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions and Chairman of the IHC Editorial Advisory Board. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult legal advisors to determine the laws and regulations applicable to your company. Any opinions expressed within this document are solely the opinion of the individual author.