The ACA Individual Mandate

In this short, easy to follow video, learn about the ACA Individual Mandate and how to prevent fines at Tax-time.

The ACA Individual Mandate

A key provision of the Affordable Care Act (ACA) is the individual shared responsibility provision,

which requires most individuals to purchase health insurance coverage or pay a penalty. Because this provision has the effect of requiring individuals to have coverage, it is often referred to as the “Individual Mandate”.


The short video below will explain the basics in clear, easy to understand terms.


For more information on this topic, check out the Q&A basics that follow, or call the experts at Wells Insurance at 800-849-1921.

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How much will the individual mandate penalty cost me?

The penalty for not obtaining acceptable health insurance coverage is being phased in over a three-year period. The amount of the penalty is the greater of two amounts—the “flat dollar amount” and “percentage of income amount.”


For 2014, the penalty is $95 per person or 1 percent of income. For 2015, the penalty is $325 per person or 2 percent of income. In 2016 and after, the penalty is $695 per person or 2.5 percent of income.  “Income” for this purpose is your household income minus your exemption (or exemptions for a married couple) and standard deductions. Families will pay half the penalty amount for children.


The penalty is calculated on a monthly basis and will be assessed for each month that you go without coverage. If you have coverage for at least one day in a month, you are considered to be covered for that month. There is no penalty for a single lapse in coverage that lasts no longer than two months.


For example, you don’t have coverage from April 9 to July 19. Because you had coverage for at least one day for both April and July, you are considered to be covered for those months and not covered for May and June. Assuming you had coverage the rest of the calendar year, you will not be subject to the penalty.

How do I qualify for a hardship exemption?

The hardship exemption is available through the Exchange if you face a hardship that prevents you from obtaining coverage. HHS has said that each of the following situations will always qualify as a hardship:

  • If you turn down coverage because the Exchange projects that it will be unaffordable (even if your actual income for the year turns out to be higher, so that you are not eligible for the affordability exemption)
  • If you are not required to file an income tax return but technically fall outside the exemption for those with household income below the filing threshold
  • If you would be eligible for Medicaid under the expansion but live in a state that does not expand Medicaid eligibility
  • If you face other unexpected personal or financial hardships, you may be eligible for a hardship exemption. This will be determined on a case-by-case basis.
Is there financial assistance available to help me purchase health insurance coverage?

Federal subsidies in the form of premium tax credits and cost-sharing reductions are available to low-income individuals who purchase health insurance through an Exchange. The Exchanges became operational Jan. 1, 2014.

To be eligible for a premium tax credit, you:

  • Must generally have household income that is between 100 percent and 400 percent of the federal poverty line (FPL) for your family size
  • May not be claimed as a tax dependent of another taxpayer
  • Must file a joint return, if married
  • Must enroll in one or more qualified health plans through an Exchange
  • Cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan)
  • The amount of the premium tax credit varies based on your household income.
  • Some individuals who are enrolled in coverage through an Exchange may also be eligible for cost-sharing reductions to help them pay their medical expenses. Only those individuals with household incomes of up to 250 percent of the FPL are eligible.

There are several premium subsidy calculators available online that you can use to predict your health care costs, including this one.

Who is exempt from the individual mandate?

You may be exempt from the individual mandate penalty if you:

  • Cannot afford coverage (that is, a required contribution for coverage would cost more than 8 percent of your household income)
  • Have income below the federal income tax filing threshold
  • Are not a citizen, national or lawfully present in the United States
  • Experience a single gap in coverage for not longer than a two-month period
  • Qualify as a religious conscientious objector
  • Are a member of a health care sharing ministry
  • Are a member of certain Indian tribes
  • Are given a hardship exemption by HHS
  • Are incarcerated
  • If you are eligible for an exemption for any day of a month, the Internal Revenue Service (IRS) has said you will be treated as exempt for the entire month.
  • Also, if you obtained health insurance coverage (either an Exchange plan or group or individual coverage outside of the Exchange) with an effective date on or before May 1, 2014, you will be exempt from the individual mandate penalty for months prior to the effective date of your coverage.
How will the penalty be collected?

Starting in 2015, everyone who files a federal tax return for the previous year will be required to report the following:

  • Which members of your family (including yourself) are exempt from the individual mandate
  • Whether each person who is not exempt had insurance coverage for that year
  • You will owe a penalty for each non-exempt family member who doesn’t have coverage. If you and your spouse file a joint return, you are jointly liable for the penalties that apply to either or both of you.
  • If you are eligible to claim a dependent, you will be responsible for reporting and paying the penalty for that dependent.

For more information about individual insurance and health care reform, or for help getting started, contact Wells Insurance today at 800-849-1921.

This Know Your Insurance article is provided by Wells Insurance and is to be used for informational purposes only and is not intended to replace the advice of an insurance professional. Visit us at ©2014 Zywave, Inc. All rights reserved.

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