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Health reform and the individual mandate Posted: November 28th, 2010

By Meredith Ledford

On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act. This law put into place comprehensive health insurance reforms focused on accomplishing three goals: lowering health care costs, guaranteeing more health care choices and enhancing health care quality.

Because the health care system--from insurers to consumers and from physicians to special interests like hospitals and pharmaceuticals--is such a large component of the U.S. economy, all the changes included in the law will not be implemented at once, but spread out over time from 2010 to 2014 and beyond.

One change that has garnered much attention is the individual mandate, or the requirement that nearly all U.S. citizen must have health insurance coverage. Here are some answers to a few of the key questions you may have about this requirement.

When will this requirement affect you?

All individuals are required to have "essential" health insurance, according to the federal government's official health reform website, Healthcare.gov, beginning on January 1, 2014. However, some individuals will be exempt from this requirement.  

What is "essential" coverage?

According to the Commonwealth Fund, essential coverage can be achieved in a variety of ways including through an eligible employer-sponsored health insurance plan, Medicare, Medicaid, CHIP, TRICARE for Life (the veteran's health care program), a health plan offered in the individual market or exchanges, a grandfathered plan or other coverage that the Health and Human Services secretary recognizes for this purpose.

Are you exempt from the requirement?

Some individuals are exempt from the individual health insurance mandate, and therefore, do not have to pay a penalty. These individuals include:

  • Low-income individuals defined as those below income tax filing thresholds of $9,350 for a single individual and $18,700 for a couple
  • Individuals who cannot find a plan at a cost of less than 8 percent of their income, net of subsidies, and employer contributions
  • Individuals who have been without coverage for less than three months
  • American Indians
  • Incarcerated individuals
  • Individuals not lawfully present in the country
  • Individuals who do not want coverage for certain religious beliefs

What is the penalty if you do not comply with the requirement?

The Kaiser Family Foundation says that people who are not exempt from the requirement, and who cannot demonstrate on a tax form that they have minimum essential coverage, will be required to pay a yearly financial penalty. The annual financial penalty will be phased in from 2014 to 2016. In the first year, the penalty will be equal to the greater of $95 or 1 percent of income in excess of the tax filing income, $325 or 2 percent of income in excess of the tax filing income in 2015, and $695 or 2.5 percent of income in excess of the tax filing income in 2016. The maximum penalty amount per family will be $2,085.