Health care reform requires virtually all individuals to have minimum essential health coverage or pay a penalty on their tax return. This health care reform requirement is called the “individual mandate.”
The IRS issued a proposed set of rules describing what coverage will be considered minimum essential coverage for purposes of the individual mandate.
Minimum essential coverage can be individual health coverage, employer-provided health coverage, or coverage under certain government programs such as Medicare or Medicaid. However, all of these coverages do not, according to the IRS, provide full minimum essential coverage that would preclude an individual from being subject to the individual mandate tax penalty.
Government Programs
The new guidance clarifies that while Medicaid is considered to provide minimum essential coverage, some Medicaid coverage that provides only limited benefits will not be considered minimum essential coverage. This includes certain programs like pregnancy services and emergency care. Medical care provided under the military health system that is limited in scope is also not minimum essential coverage.
Even though these coverages will not be considered minimum essential coverage, an IRS notice released with the proposed rules offers a waiver from the tax penalty for 2014 for individual enrolled in the limited-scope government programs.
Method for Determining Penalty
An individual who is not eligible for coverage under an employer-sponsored health plan can be exempt from the tax penalty if the individual cannot afford minimum essential coverage. In making the affordability determination, the regulations require the cost calculation to be based on a bronze-level health plan. If a bronze-level health plan is not available that would cover all members of the family, the premiums for all family members are added together instead.
The proposed regulations revise the calculation process to apply on an individual, not family basis.
More guidance will certainly be forthcoming as the penalty phase of the individual mandate is implemented this year.
