What Is the Individual Mandate?

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Definition

The individual mandate—officially called the individual shared responsibility provision—requires virtually all citizens and legal residents of the United States to have health insurance.

People who don’t have health insurance must pay a penalty tax called the shared responsibility payment, unless they're eligible for an exemption from the penalty.

Background of the Individual Mandate

A controversial part of the Affordable Care Act, individual mandate opponents argued that the government shouldn’t be allowed to penalize people for not buying something.

Challenges to the constitutionality of the individual mandate went all the way to the Supreme Court.

The Supreme Court decided the penalty imposed by the individual mandate was actually a tax on people who go without health insurance. Since the government has the right to tax its citizens, the Supreme Court decided the individual mandate was constitutional.

How the Individual Mandate Works

Some people are exempt from the individual mandate, but the majority of Americans fall under its mandate and are subject to its penalty. People who remain uninsured but aren't exempt have to pay the shared responsibility payment when they file their federal income taxes.

In order to help people comply with the individual mandate, the Affordable Care Act (ACA) required the creation of health insurance exchanges, or marketplaces, where people can buy health insurance.

The ACA also provided for subsidies that keep premiums affordable for people with household income that doesn't exceed 400 percent of the poverty level (that's $97,200 for a family of four in 2017), as well as subsidies that make out-of-pocket costs more affordable for people with household income that doesn't exceed 250 percent of the poverty level (that's $60,750 for a family of four in 2017).

The ACA also called for the expansion of Medicaid to everyone with household incomes up to 138 percent of the poverty level, in order to provide access to very low-cost health care for low-income Americans. But the Supreme Court ruled that Medicaid expansion was optional, and 19 states still hadn't expanded Medicaid as of late 2016.

In 18 of those states, people with income below the poverty level are in the coverage gap, without any realistic access to health insurance. They are exempt from the individual mandate penalty however, as there's a specific exemption for people who would have been eligible for Medicaid but who live in a state that hasn't expanded Medicaid.

How many people owe a penalty?

In early 2016, the Internal Revenue Service reported that for the 2014 coverage year, a total of 7.9 million tax filers reported a total of $1.6 billion in shared responsibility provision penalties that averaged about $210 per tax filer.

On the other hand, there were 12.4 million tax filers who were also uninsured in 2014, but who claimed one of the exemptions and were therefore not subject to the penalty.

How much is the penalty?

If you're uninsured and not eligible for an exemption, the penalty (as of 2016) is the GREATER OF: 

  • 2.5 percent of your taxable household income (this will remain the same in future years)
  • $695 per uninsured adult, plus $347.50 per uninsured child, up to a maximum of $2,085 per family (this will be adjusted annually for inflation beginning in 2017)

    The maximum penalty is the national average cost of a bronze plan. 

    How Much Is the Health Insurance Penalty for an Individual?” shows how to calculate your penalty for being uninsured.This allows you to predict what you’ll owe as your lifestyle and financial situation change. " How Much Is the Health Insurance Penalty for Families?" explains how to calculate the shared responsibility payment for a family.

    Also Known As: health insurance mandate, coverage mandate, individual shared responsibility

    Updated by Louise Norris.

    Sources:

    Internal Revenue Service, Individual Shared Responsibility Provision—Reporting and Calculating the Payment.

    Internal Revenue Service, Individual Shared Responsibility Provision—Exemptions: Claiming or Reporting.

    Internal Revenue Service, Letter from IRS Commissioner John Koskinen to Congress, detailing preliminary data for the Affordable Care Act provisions. January 8, 2016.

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