Last June the Supreme Court ruled that PPACA, including the individual mandate, is constitutional. Under the law, individuals are required to purchase health care insurance and if they do not, the penalty will be a tax. In order to avoid this tax, a person must have “minimum essential” coverage. This coverage can be obtained through the person’s employer, Medicare, Medicaid, TRICARE, the VA, an individual policy or an exchange.
For those that fail to comply with the individual mandate, they will have to pay a tax which will be collected with their federal income tax. The tax is being phased in – it is:
- 1% of income or $95, whichever is greater, in 2014
- 2% of income or $325, whichever is greater, in 2015
- 2.5% of income or $695, whichever is greater, in 2016 and later years
If an entire family is not covered, the tax applies to each adult. Fifty percent of the tax applies to each child under age 19. There is a family maximum of 3X the individual adult tax.
If the person cannot afford coverage, premium tax credits (which may be claimed during the year, rather than waiting until the person files their federal income tax return) are available to help pay a person’s premium if:
- They obtain coverage through the exchange, and
- Their income is between 100%-400% of the federal poverty level (FPL). (The amount of the credit is graduated based on income, so that a person whose income is 100% of FPL will only pay 2% of their income for coverage and those at 400% of FPL will pay 9.5%.)
People below 133% of FPL will receive coverage through an expanded Medicaid program, unless their state opts out of expanded Medicaid.
Additionally, people with incomes of 100%-250% of FPL will be eligible for reduced cost sharing (deductibles, coinsurance and copayments) if they obtain coverage through the exchange. The amount of cost-sharing assistance is graduated based on income.
