The ACA’s Individual Responsibility Requirement
Doug Anderson, Esq. Direct: 614.229.3301 Doug.Anderson@baileycavalieri.com
The Responsibility Requirement If you can afford insurance and choose not to buy it, you must pay a fee called the “individual responsibility requirement.” –
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You owe the fee for any month you, your spouse, or dependents don’t have insurance qualifying as “minimum essential coverage.” You pay the fee on your federal tax return You may qualify for an exemption, however
The Individual Responsibility Requirement: Minimum Coverage Type of health insurance that qualify as “minimum essential coverage”: Qualified health plans on or off the Marketplace Any grandfathered coverage Any job-based, retiree or COBRA coverage Medicare Part A or B Medicaid or CHIP coverage Coverage under a parent’s plan Most student insurance Peace Corp, VA, Tricare, DoD, Refugee coverage High risk pool coverage
The Individual Responsibility Requirement: Penalty Calculation The “fee� is calculated in 2 ways: 1)
2)
Percentage of Income; or Per person fee
You will pay whichever is higher.
The Individual Responsibility Requirement: Penalty Calculation For 2016, ď ŹPercentage of Income = 2.5% of household modified gross adjusted income, up to the total yearly premium for the national average Bronze plan sold on the Marketplace ď ŹOnly income above the tax filing threshold is considered ($10,300 for individuals in 2015) ď ŹIn 2015, the average Bronze plan was $2,484 per person and $12,240 per family of 5.
The Individual Responsibility Requirement: Penalty Calculation For 2016, Per Person Method = $695 per adult, plus $347.50 per child, up to $2,085. With per person, you only pay for people in your household that don’t have insurance After 2017, the per person dollar amount will be increased based on inflation
The Individual Responsibility Requirement
If you don’t have coverage for part of the year, the fee is 1/12 of the penalty for each month you don’t have coverage. If you are not covered for only 1 or 2 months, there is an exception and you don’t have to pay any fee. If you don’t pay the fee on your tax return, the IRS will hold back future refunds. There are no liens, levies or criminal penalties.
The Individual Responsibility Requirement: An Example An example: Jim makes $40,000 and does not have minimum essential coverage. – –
Percentage calculation: $40,000 - $10,300 = $29,700. $29,700 X 2.5% = $742.50. Per person method: $695.
Jim will pay 1/12th of $742.50 for each month he does not have coverage.
The Individual Responsibility Requirement: Exemptions Exemptions: 1.Coverage is unaffordable – the minimum amount you pay for employer coverage or a bronze plan exceeds 8.05 of your income. 2.You income is below the filing threshold. 3.U.S. citizens living abroad, resident of a U.S. territory, resident aliens, not lawfully present in the U.S.
The Individual Responsibility Requirement: Exemptions Exemptions continued: 4)Members of sharing ministries 5)Members of Indian tribes with Indian health services 6)Incarceration 7)Certain religious sects 8)General hardships such as homelessness, eviction, foreclosure, domestic violence, death of a family member, flood or natural disaster, bankruptcy, unpaid medical bills, caring for an ills or disabled family member
The Individual Responsibility Requirement: Exemptions Exemptions continued: 9)Income below 138% of the FPL in a state that did not expand Medicaid. 10)Current coverage was not renewed and other plans are unaffordable 11)AmeriCorp coverage 12)Short coverage gap (less than 3 months)