Under the Affordable Care Act, the federal government, state governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States.
Starting in 2014, the individual shared responsibility provision calls for each individual to have minimum essential health coverage (known as minimum essential coverage) for each month, or qualify for an exemption. Otherwise, they are required to make a payment when filing their federal income tax return.
The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.
The provision went into effect on Jan. 1, 2014. It applies to each month in the calendar year. The amount of any payment owed takes into account the number of months in a given year an individual is without coverage or an exemption.
Minimum essential coverage includes at a minimum all of the following:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare coverage (including Medicare Advantage)
- Medicaid coverage
- Children's Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
- TRICARE
Minimum essential coverage does not include specialized coverage, such as coverage only for vision care or dental care, workers' compensation, disability policies, or coverage only for a specific disease or condition. The Department of Health and Human Services (HHS) has authority to designate additional types of coverage as minimum essential coverage.
The statutory exemptions from the requirement to obtain minimum essential coverage include:
- Religious conscience: You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
- Health care sharing ministry: You are a member of a recognized health care sharing ministry.
- Indian tribes: You are a member of a federally recognized Indian tribe.
- No filing requirement: Your household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age, and types and amounts of income.
- Short coverage gap: You went without coverage for less than three consecutive months during the year. If an individual has two short coverage gaps during a year, the short coverage gap exemption only applies to the first or earlier gap.
- Hardship: A Health Insurance Marketplace, also known as an Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
- Unaffordable coverage options: You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.
- Incarceration: You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
- Not lawfully present: You are neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.
Most individuals in the United States have health coverage today that counts as minimum essential coverage and do not need to do anything more than continue the coverage that they have. If an employee enrolls in employer-sponsored coverage for himself and his family, the employee and all of the covered family members have minimum essential coverage. However, it is not necessary for you, your spouse and your dependent children to have coverage under the same policy or plan.
For those who do not have coverage, who anticipate discontinuing their current coverage, or who want to explore whether more affordable options are available, Health Insurance Marketplaces (also known as Affordable Insurance Exchanges) are accessible in every state and the District of Columbia. These Health Insurance Marketplaces help qualified individuals find minimum essential coverage that fits their budget and potentially financial assistance to help with the costs of coverage. The Health Insurance Marketplace is also able to assess whether applicants are eligible for Medicaid or the Children’s Health Insurance Program (CHIP).
For those seeking an exemption, a Health Insurance Marketplace is able to provide certificates of exemption for many of the exemption categories. HHS has proposed regulations on how these exemptions are granted. Individuals will also be able to claim exemptions for 2014 when they file their federal income tax returns in 2015. Individuals who are not required to file a federal income tax return are automatically exempt and do not need to take any further action to secure an exemption.
Because, the individual shared responsibility provision goes into effect in 2014, you will not have to account for coverage or exemptions or to make any payments until you file your 2014 federal income tax return in 2015. However, you should obtain coverage if you do not already have it, or consider your eligibility for an exemption as soon as possible.
If you would like additional information on the individual shared responsibility provision or on health care reform in general, please contact our office. We are happy to answer your questions.
