Final regulations on the Individual Mandate under health care reform were issued last week. Health care reform requires virtually all Americans to be enrolled in minimum essential health coverage or pay a penalty on their tax return. While the employer mandate to offer health coverage was delayed a year, the individual mandate is effective January 1, 2014.
Dependents Must Be Covered
A taxpayer is responsible for making sure dependents claimed on his or her tax return also have health coverage. If a dependent does not have coverage, the taxpayer must pay a fine.
Minimum Essential Coverage
Most employer-provided coverage meets the definition of minimum essential coverage. Coverage purchased through the Exchanges will be acceptable, as will government-provided coverage such as Medicare.
Penalty Amount
The tax penalty is relatively small compared to the cost of health insurance. In 2014, the penalty for not having insurance is the greater of $95 per person or 1.0% of taxable income. In 2015 the fine is raised to the greater of $325 per person or 2.0% of taxable income, and in 2016, the fine is the greater of $695 per person or 2.5% of taxable income (plus costs for non-covered dependents). Penalties may be adjusted for inflation, and there are dollar limits for family coverage.
Individuals who forego health insurance will have to do a cost-benefit analysis to determine if they want to purchase coverage or pay a penalty.
