Health care is a critically important issue for everyone. If you don’t have coverage- or if you’re changing insurance companies- the issue can be very stressful. Despite the best efforts of US Health and Human Services, the Affordable Care Act (ACA) is still confusing to many people. One big area of confusion is the individual mandate.
What is the Affordable Care Act (ACA)?
The ACA is a program designed to provide health insurance to all US citizens. The law attempts to resolve health care issues that are difficult for consumers. The politics related to the ACA (Obamacare) continue to be debated.
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The purpose of this post is to address the individual mandate. The ACA requires every person to have insurance, or pay a penalty. There may be confusion as to whether or not the mandate applies to you.
The individual mandate penalty
The website for ACA is your starting point for learning about the mandate. This page explains the penalty for not having coverage. In 2015, the fee is 2% of your yearly household of $325 per person- whichever is higher. The 2% figure only applies to the amount above $10,150 (for an individual). This $10,150 is close to the minimum amount of income you must earn and be required to file a tax return (single person).
Exemptions from the penalty
This page explains the exemptions from the penalty. Read this page carefully to determine if an exemption applies to you. There are two broad categories of exemptions:
- Hardship exemptions: If a person is in crisis, a hardship exemption may apply. This applies to people who face eviction or foreclosure, individuals who are bankrupt and other situations. It’s important to note that, if your individual insurance is cancelled, a hardship exemption may apply.
- Minimum essential coverage: If you are covered by an insurance plan that meets this description, you may also be exempt. This site provides a list of those plans.
How the penalty is assessed
If you’re subject to the penalty, you pay it through your individual tax return. The penalty is referred to as a Shared Responsibility Payment. This IRS link goes over the process for 2014.
IRS Form 8965 is used to calculate your payment and any exemptions. The payment amount is posted to line 61 of your individual tax return (Form 1040). Note that these forms will change slightly from year to year.
Use these tips to determine if the individual mandate applies to you. Understanding the process will help you plan your finances and give you some peace of mind.
Do you know of someone who faced the challenge of paying the penalty? I’d love to hear from you.
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