Individual Mandate in Health Care Reform
The Individual Mandate requires most Americans to have health insurance or pay a penalty when they file their federal income tax return. Individuals must have "minimal essential coverage," which includes:
- Coverage under an employer-sponsored plan
- Coverage under an individual insurance policy
- Coverage under a government-sponsored plan such as Medicare or Medicaid
- U.S.-issued expatriate insurance coverage
Each of these types of coverage has different enrollment timing. Employers determine the annual enrollment period for their coverage. The federal government determines eligibility and enrollment timing for Medicare, and states manage Medicaid enrollment.
Enrollment in Individual Health Insurance
People can enroll in individual health insurance directly with an insurance company or through the health insurance marketplaces created under the ACA. Federal premium subsidies are only available to those who enroll in individual coverage through the marketplace. Currently, about 70% of people who buy coverage through the marketplaces receive subsidies.
The annual marketplace enrollment period begins each November 1 and ends on January 31 of the following year. Individuals must enroll by the 15th of the month for coverage to take effect on the first of the next month.
Individuals who lose coverage or have a life event such as marriage or the birth of a child may be eligible for a special marketplace enrollment period during other times of the year.
If you have questions about enrollment through a marketplace or want to enroll, visit HealthCare.gov or call 1-800-318-2596.
Five Facts about the Penalty for Not Having Health Coverage
- If you are uninsured for more than three consecutive months of any year, you will owe a penalty when you file your federal income tax return for that year.
- The penalty is based on the number of months during which you did not have coverage.
- The penalty is calculated two different ways – as a fixed amount for each person without coverage or as a percent of your annual household income. You pay the larger of the two amounts.
- The penalty increases each year. Here are the penalties for 2015 and 2016.
- $325 per adult and half of that amount per child (up to a maximum of $975)
- 2% of household income over tax-filing threshold
- $695 per adult and half of that amount per child (up to a maximum of $2,085)
- 2.5% of household income over tax-filing threshold
- People with low incomes and individuals who meet certain conditions can receive an exemption from the Individual Mandate. That means they do not have to pay a penalty even though they do not have coverage. Some of the exemptions include:
|The greater of:||
- Income below 100% of the federal poverty level
- Coverage costs more than 8% of family income
- Being without coverage for less than three months during the year
- Religious reasons
- Not living in the United States
- In prison
- Having a hardship waiver
Tax Forms for the Individual Mandate Requirement
The Internal Revenue Service (IRS) created tax forms specifically to report health insurance coverage on federal income tax returns. These forms are returned to the IRS by health insurers, health marketplaces and employers. Additionally, Forms 1095-A, B and/or C are sent to any person who had health coverage that met the Individual Mandate requirement at any time during the previous calendar year, as outlined below:
- Form 1095-A, Health Insurance Marketplace Statement, sent to individuals who are enrolled in coverage through the Marketplace
- Form 1095-B, Health Coverage, sent to individuals who have health coverage that is not reported on Form 1095-A or Form 1095-C
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, sent to individuals who have coverage through applicable large employers
These forms must be sent by the end of January*, following the year of coverage to help people complete their individual tax returns.** 1095 Forms should also be shared with covered adult dependents who file their own taxes.
In some instances, people may receive more than one 1095 Form. For example, if an individual had more than one coverage provider or a change in coverage or employers during the year, multiple forms would be issued.
For more information on 1095 Forms, please visit the IRS's FAQ page.
*For 2015 only, filing deadlines have been extended and 1095 Forms must be provided to individuals by March 31, 2016.
** For 2015, individuals do not need to wait to receive their Forms 1095-B and 1095-C before filing tax returns. Individuals enrolled in coverage through the Marketplace and claiming a premium tax credit will need to wait to receive their Form 1095-A to complete their tax returns. Everyone should keep their 1095 Forms with their tax records.
More on Reform
Public Marketplaces/ Exchanges
Marketplaces are the government run online shopping hubs for health insurance, available in every state.
Certain preventive care services and immunizations must be covered with no out-of-pocket costs.
Essential Health Benefits
These new standards are required for individual and small group plans and may also affect large group plans.