Under the Affordable Care Act, the government, insurers, employers, and individuals share in the responsibility to improve the availability, quality, and affordability of health insurance coverage. The individual shared responsibility provision is a key part of helping to deliver the law’s consumer protections at an affordable cost. It makes these protections possible by ensuring that individuals do not just wait to purchase insurance when they are sick and drop coverage when they are well, which drives up premiums for everyone.
Starting in January 2014, the individual shared responsibility provision calls for each individual to have:
- Basic health insurance coverage (known as minimum essential coverage)
- Qualify for an exemption, or
- Make an individual shared responsibility payment when filing a federal income tax return.
Individuals will not have to make a payment if coverage is unaffordable, if they spend less than three consecutive months without coverage, or if they qualify for an exemption for several other reasons, including hardship and religious beliefs.
According to the Congressional Budget Office, less than two percent of Americans will owe a shared responsibility payment.
The Department of Treasury recently issued final guidance that helps to clarify these requirements. Key highlights of include:
Minimum Essential Coverage
Under the final regulations, minimum essential coverage includes, at a minimum, all of the following:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare Part A coverage
- Medicaid coverage
- Children’s Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
Under the regulations, there are several situations that will always be treated as constituting a hardship and therefore qualify for an exemption. These include:
- Individuals who the new Health Insurance Marketplace projects will have no offer of affordable coverage; and
- Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility. This rule will protect individuals in states that decline to expand Medicaid eligibility.
Under the regulations, a hardship exemption will also be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.
What Does Coverage for Each Month Mean?
The regulations also provide that an individual is treated as having coverage for a month so long as he or she has coverage for any one day of that month. For example, an individual who starts a new job on February 26 and is enrolled in employer-sponsored coverage on that day is treated as having coverage for the month of February. And an individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.
Individuals who experience short coverage gaps — less than three consecutive months — are also exempt from payment.
When Are the First Payments Due and Where Can I Go to Get More Information?
Starting in early 2015, individuals filing a tax return for 2014 will indicate which members of their family (including themselves) are exempt from the provision. For family members who are not exempt, the taxpayer will indicate whether they had insurance coverage. For each non-exempt family member who doesn’t have coverage, the taxpayer will owe a shared responsibility payment.
For more information about new benefits and opportunities to purchase health insurance coverage through the individual Marketplace, visit healthcare.gov.