By Joe Touschner

Now that 2014 is here, the Affordable Care Act’s individual mandate is in effect to encourage individuals and families to maintain health coverage.  This year, though, will be a transition year for many when they won’t face any penalty for reasonable gaps in coverage.  We’ve learned more about how the individual mandate will work over the last couple of months, so we wanted to share some updates:

• Employees and their families who did not elect coverage during their employers’ 2013 open enrollment periods will not face a penalty under the individual mandate until the 2014 open enrollment period comes around.  For instance, if an employer’s last open enrollment period was in June 2013, an employee and family may technically have an offer of affordable coverage, so they cannot qualify for subsidies in the marketplace.  But they may not be able to actually enroll in their employer plan until next June.  Under transition relief from the IRS, such a family won’t face a tax penalty for going without coverage until they actually have an opportunity to enroll in June 2014.
• HHS has released the forms families can use to apply for a hardship exemption from the individual mandate.  Responding to a suggestion from CCF and others, the department added to the form the option to describe a hardship that doesn’t fit one of the pre-defined categories listed.  This allows any families facing hardships that HHS could not anticipate to claim an exemption.  In addition, the form allows those whose plans were cancelled to claim an exemption if they find alternative plans unaffordable.
• IRS issued a formal notice to exempt individuals with certain kinds of Medicaid coverage from individual mandate penalties in 2014.  It specifies that those enrolled in family planning services Medicaid, tuberculosis-related services Medicaid, pregnancy-related Medicaid, emergency medical conditions Medicaid, certain Section 1115 demonstration projects, or coverage for medically needy individuals (spend-down Medicaid) will not face a penalty for months they are enrolled in 2014, even though these types of coverage are not defined as minimum essential coverage (MEC).

Already in 2014, marketplace plans, Medicaid, and CHIP are covering more and more of those who had gone without coverage, satisfying their obligations under the mandate but more importantly offering protection for their health and finances. Those who still can’t access minimum essential coverage for the reasons noted above will at least have one fewer worry—they won’t have to make a payment under the individual mandate.