By Joe Touschner

With the end of open enrollment approaching, it’s a good time to review some of the rules surrounding the ACA’s individual responsibility requirement, or individual mandate.  Overall, the individual mandate is intended to impose a tax penalty on those who have access to affordable health coverage yet choose to go uninsured for an extended period.  While the idea is simple, implementing it takes a somewhat lengthy list of rules to make sure the mandate and its tax penalties only apply to those the law intends.  Some of the most salient rules for children and families are discussed below; other detailed questions are addressed by the Kaiser Family Foundation’s Health Reform FAQ and a Questions and Answers document from the IRS.

• First, the mandate applies staring this year, 2014.  No one needs to worry about mandate tax penalties as they prepare their tax returns for 2013 before next month’s deadline.

• Most people won’t need to be concerned with the mandate in the future, either.  Those who have health coverage through an employer, Medicare, Medicaid, CHIP, Tricare, or a veteran’s health program satisfy the mandate, as do those who have a grandfathered health plan or almost any individual market plan, including all of those offered through marketplaces.

• If they don’t have a source of coverage or qualify for an exemption, the mandate does apply to children.  When a child is uninsured and not exempt, anyone who claims the child as a dependent will owe a mandate penalty.  The amount of the penalty for children is half that of adults and the maximum penalty a single family would pay is capped.

• A number of exemptions from the mandate are available.  Some exemptions are available through marketplaces (mp), others can be obtained from the IRS when filing taxes, and some can be claimed from either source.  Exemptions apply for those:

  • Who would have to pay more than 8% of their household income for the lowest cost coverage available to them (mp or IRS)

  • Who are not lawfully residing in the US (IRS)

  • Whose income is less than the threshold for filing a tax return (even if they do file).  That threshold is roughly $10,000 for an individual and $20,000 for a married couple.  No application is needed for this exemption.

  • Who would qualify for Medicaid but for their state’s decision not to expand the program under the ACA (mp)

  • Who are members of an Indian tribe (mp or IRS)

  • Who are incarcerated (mp or IRS)

  • Who are members of a health sharing ministry or a recognized sect with religious objections to health insurance (mp or IRS)

  • Who experience a hardship that prevents them from purchasing coverage (mp).  The hardship exemption form lists 13 categories of qualifying hardships (like homelessness or bankruptcy) and allows applicants to describe other circumstances that prevented them from obtaining coverage.

• Any penalty owed will be calculated on a monthly basis.  Having coverage on one day of a month satisfies the mandate for that month.

• Short coverage gaps of less than three months will not trigger mandate penalties.

• In this first year of the responsibility requirement, the IRS will not enforce the penalty for anyone who has an offer of employer-sponsored coverage (both employees and family members) but has not yet had an open enrollment period in 2014.  For instance, if an employer’s open enrollment period is in September, eligible employees and their families will not owe penalties for January through August of 2014.

• The IRS also clarified that those with certain types of Medicaid coverage that does not count as minimum essential coverage will not face penalties for 2014.  This includes those enrolled in pregnancy-related Medicaid, medically needy (spend-down) Medicaid, emergency Medicaid, optional family planning Medicaid, or tuberculosis-related Medicaid coverage.

For those without coverage, the mandate is intended to be an additional motivation to sign up, which they can do through marketplaces through March 31 or anytime they qualify for a special enrollment period.  Understanding the rules about when the mandate applies should put most people at ease knowing they won’t face penalties.  But for those who don’t already satisfy the mandate or qualify for an exemption, now is the time to act to get coverage!