ACA’s individual mandate: Facts about the health tax penalty

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    Health tax penalty is coming in 2014

    Do you know what happens if you have to pay a health tax penalty in 2014? (Shutterstock)


    The Affordable Care Act is already changing health care for many people in the United States; children can now stay on parents’ insurance until age 26, seniors are enjoying discounted prescription programs, and insurance companies are no longer allowed to deny coverage for preexisting conditions. But one thing has yet to be addressed regarding the ACA—the health tax penalty, also known as the individual mandate.

    We will start dealing with the individual mandate in 2014 when most individuals will be required to have some form of health insurance. By 2016 it will be in full effect.

    How does the health tax penalty work?

    According to a report from the Henry J. Kaiser Family Foundation, the health tax penalty will appear gradually over the course of three years, with rates progressively increasing to their maximum in 2016.

    If you have access or can afford to get health insurance, but choose not to, then the health tax penalty applies to you.

    In 2014, most individuals who are eligible for health insurance must purchase a plan either through their employer, through private companies, or through state-mandated insurance programs.

    The only individuals exempt at this stage are:

    • Undocumented immigrants,
    • Members of certain religions,
    • Individuals who are incarcerated,
    • Native Americans,
    • People with a family income below the taxable level,
    • Those who must pay more than 8 percent of their income for health insurance.

    Other individuals who have minimal health coverage will also be able to avoid the health tax penalty such as those who were members of:

    • Medicare,
    • Medicaid,
    • TRICARE,
    • A veteran’s health program,
    • Some plans offered by employers,
    • Minimal insurance purchased at the state’s Bronze Level,
    • Individuals grandfathered into a health plan before the ACA was in effect.

    If the above exemptions are not met, individuals are subject to the health tax penalty starting in the 2014 filing season.

    At that time, the penalty will be $95 per adult and $47.50 per child, with a maximum health tax penalty of $285 per family or 1 percent of family income, whichever is greater.

    In 2015, those numbers increase; the new health tax penalty will be established at $325 per adult and $162.50 per child, with a maximum health tax penalty of $975 per family or 2 percent of family income, whichever is greater.

    The individual mandate goes into full effect during 2016. Uninsured individuals will then pay $695 per adult and $347.50 per child, with a maximum penalty of $2,085 for a family or 2.5 percent of family income, whichever is greater.

    What happens if you can’t pay the health tax penalty?

    There will be individuals who cannot or won’t purchase insurance and similarly can’t or won’t pay the impending penalty for lack of coverage; however, a report from the Washington Post indicates not much will happen to those who cannot pay the individual mandate fine. The ACA itself states no criminal action or liens can be imposed on those who fail to pay.

    Depending on the number of people who abuse this leniency, Congress may eventually impose further penalties as the individual mandate goes into full effect.

    Health tax penalty chart

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