1109Though employ­ers are not required to edu­cate employ­ees about their indi­vid­ual respon­si­bil­i­ties under the Patient Pro­tec­tion and Afford­able Care Act (ACA), it is help­ful to know about the indi­vid­ual mandate.

The indi­vid­ual respon­si­bil­i­ty require­ment (also known as the indi­vid­ual man­date) became effec­tive for most peo­ple as of Jan­u­ary 1, 2014. Under the indi­vid­ual man­date, most peo­ple resid­ing in the U.S. are required to have min­i­mum essen­tial cov­er­age or they must pay a penal­ty. Many indi­vid­u­als will be eli­gi­ble for finan­cial assis­tance through pre­mi­um tax cred­its (also known as pre­mi­um sub­si­dies) to help them pur­chase cov­er­age if they buy cov­er­age through the health insur­ance Mar­ket­place (also known as the Exchange).

For 2014, the penal­ty for an adult was the greater of $95 or 1 per­cent of house­hold income above the tax fil­ing thresh­old. For 2015, the penal­ty was the greater of $325 or 2 per­cent of income above the tax fil­ing thresh­old. For 2016, the penal­ty is the greater of $695 or 2.5 per­cent of income above the tax fil­ing threshold.

The penal­ty for a child under age 18 is 50 per­cent of the adult penal­ty. The max­i­mum penal­ty per fam­i­ly is three times the indi­vid­ual penal­ty. The penal­ty is cal­cu­lat­ed and paid as part of the employee’s fed­er­al income tax filing.

A per­son must have “min­i­mum essen­tial cov­er­age” to avoid a penal­ty. Min­i­mum essen­tial cov­er­age is basic med­ical cov­er­age and may be pro­vid­ed through an employ­er, Medicare, Med­ic­aid, CHIP, TRICARE, some VA pro­grams, or an indi­vid­ual pol­i­cy (through or out­side the Mar­ket­place). Accept­able employ­er cov­er­age includes both insured and self-fund­ed PPO, HMO, HDHP and fee-for-ser­vice plans, as well as grand­fa­thered cov­er­age, COBRA, retiree med­ical, and health reim­burse­ment arrange­ments (HRAs). It does not mat­ter whether the cov­er­age is pro­vid­ed direct­ly by the employ­er or through anoth­er par­ty, such as a mul­ti­em­ploy­er plan, a col­lec­tive­ly bar­gained plan, a PEO, or a staffing agency.

While most peo­ple must obtain cov­er­age or pay penal­ties, indi­vid­u­als will not be penal­ized if they do not obtain cov­er­age and:

  • They do not have access to afford­able cov­er­age (cost exceeds 8 per­cent of mod­i­fied adjust­ed gross house­hold income)
  • Their house­hold income is below the tax fil­ing threshold
  • They meet hard­ship cri­te­ria (such as recent bank­rupt­cy, home­less­ness, unre­im­bursed expens­es from nat­ur­al disasters)
  • Their peri­od with­out cov­er­age is less than three con­sec­u­tive months
  • They live out­side the U.S. long enough to qual­i­fy for the for­eign earned income exclusion
  • They reside in a U.S. ter­ri­to­ry for at least 183 days dur­ing the year
  • They are a mem­ber of a Native Amer­i­can Tribe
  • They belong to a reli­gious group that objects to hav­ing insur­ance, includ­ing Medicare and Social Secu­ri­ty, on reli­gious grounds (for exam­ple, the Amish)
  • They belong to a health shar­ing min­istry that has been in exis­tence since 1999
  • They are incar­cer­at­ed (unless await­ing tri­al or sentencing)
  • They are ille­gal aliens

If the per­son has access to employ­er-pro­vid­ed cov­er­age as either the employ­ee or an eli­gi­ble depen­dent, afford­abil­i­ty of the employ­er-pro­vid­ed cov­er­age is the only fac­tor con­sid­ered for pur­pos­es of the indi­vid­ual mandate.

  • For the employ­ee, cov­er­age is unaf­ford­able (so no penal­ty applies for fail­ure to have cov­er­age) if the cost of sin­gle cov­er­age is more than 8 per­cent of house­hold income.
  • For a depen­dent, cov­er­age is unaf­ford­able (so no penal­ty applies for fail­ure to have cov­er­age) if the cost of the least expen­sive employ­er-pro­vid­ed depen­dent cov­er­age is more than 8 per­cent of house­hold income.
  • If the employ­ee and spouse both have access to cov­er­age through their own employ­er, the cost for each person’s cov­er­age is based on the cost of their own sin­gle cov­er­age, but the totals are then com­bined to see if the total cost exceeds 8 per­cent of house­hold income.


Orig­i­nal­ly pub­lished Unit­ed Ben­e­fit Advi­sors — Read More