Today, there is no law that requires you to have health insurance. That will change in 2014, when most Americans will be required to have a minimum level of health coverage or pay a tax penalty. This “individual mandate” was, and is, one of the most controversial parts of the Affordable Care Act.
This penalty could potentially reduce your 2015 tax refund from the IRS. For 2014, the penalty would be $95 or up to 1% of household income for individuals, whichever is greater (the penalty is higher for families). You owe the tax penalty for each month you don’t carry coverage, but you are allowed to go less than 3 months without coverage and not be liable for the penalty (for instance, if you are in between jobs).
Minimum coverage includes enrollment in government-run health programs like Medicaid and Medicare, coverage you get through an employer plan, or coverage you purchase yourself. It is expected that the federal government will provide much more detail about what exactly constitutes “minimum” coverage later in 2013.
Many observers are already predicting that some people – particularly young, healthy people – might opt to pay the penalty and either go uninsured or purchase a non-compliant policy that meets their present health care needs. In other words, the premiums for a compliant health insurance policy might be out of the reach of many hardworking Americans – leaving them open to the penalty.
How will this penalty be collected by the government? In 2015, when you file your personal income tax return for 2014, you will be asked about your health coverage. If you did not have the required minimum coverage for more than 3 months in 2014, you might see your tax refund reduced. At this point, it does not appear that the IRS will be sending out bills to collect the penalty.
There are a few exceptions from the requirement to purchase minimum health coverage. If you are a member of an Indian tribe or part of a religion that is opposed to health insurance, you are exempt. Also, you are exempt if you are incarcerated or an undocumented immigrant. There are also exemptions for those whose family income is below the threshold for filing a federal income tax return, or if you have to pay more than 8% of your income for health insurance.
What does this mean for you? First and foremost, it means you should begin planning your health care future NOW. Find the coverage that best meets the needs of you and your family at a price you can actually afford.
