Benefits Buzz

Individual Mandate Rules Finalized

Posted on September 5th, 2013

Last week, the U.S. Department of Treasury published final guidance on the Individual Shared Responsibility requirements, also known as the Individual Mandate. The Affordable Care Act (ACA) mandates that most U.S. citizens and permanent residents have a qualified health plan starting in 2014 or face financial penalties.

The final regulations, which span 75 pages in length, confirm the originally proposed financial penalties for those without qualified coverage. The penalty will start at the greater of $95 per person or 1% of taxable income in 2014, and it will increase to the greater of $695 per person or 2.5% of taxable income by 2016. After 2016 the amount of the penalty will be adjusted for cost-of-living increases.

The penalty applies to a maximum of three family members per tax return, and the penalty is reduced by ½ of the applicable dollar amount for children that are under the age of 18.

There are exemptions from the Individual Mandate for things such as religious objections or financial hardships, but there is also an exemption if an individual lacks access to “affordable” coverage. If a person has to pay more than 8% of their household income to purchase a plan with minimum essential coverage, then they will also be exempt from the mandate.

As a result, many older individuals who don’t qualify for subsidized coverage may be exempt from the mandate because of higher premiums that apply to them. In addition, Jonathan Gruber, an economist and one of the architects of the ACA, estimates that 40% of the current uninsured population will likely be exempt from the mandate.

Even if the penalty applies, several people have remarked upon an obvious fact that the fine is far less expensive than the cost of insurance premiums. Although this is an accurate statement for most individuals, people that choose to pay the penalty would be those without health insurance coverage. Any sort of catastrophic medical event could be financially detrimental in that scenario. 

Many people will be faced with new decisions next year as the complexities of the ACA start to become a reality. The valuable role that health insurance producers will serve has never been more apparent.

View final guidance >>

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Note: The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.  

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