On August 28, 2013, the U.S. Treasury Department and Internal Revenue Service (IRS) issued final regulations on the individual shared responsibility provisions, i.e. individual mandate, of the Affordable Care Act.  Starting in 2014, the individual shared responsibility provision calls for each individual to have basic health insurance coverage, qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return. 

This regulation, taken together with one issued earlier by the U.S. Department of Health and Human Services, explains the shared responsibility requirements and lays out the eligibility rules for receiving an exemption.  In general, individuals who are without insurance will not be subject to penalties if available coverage is unaffordable, i.e. costs more than 8 percent of household income; 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. More specifically, the final regulations provide nine categories of individuals who are exempt from the shared responsibility payment. These categories are as follows:

  • Individuals who cannot afford coverage;
  • Taxpayers with income below the income tax filing threshold;
  • Members of Indian tribes;
  • Those who can document economic hardship;
  • Individuals who experience short coverage gaps.
  • Members of recognized religious groups identified in HHS regulations as having doctrines that qualify for a religious conscienceexception;
  • Members of a health care sharing ministry;
  • Incarcerated individuals; and
  • Individuals who are not lawfully present.

The rules were drafted with an eye to ensuring that the penalty applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having access to affordable coverage.  According to the Congressional Budget Office, less than two percent of Americans will owe a shared responsibility payment.

Read the HHS rule

Read the IRS rulepdf

For questions and answers on the Individual Shared Responsibility Provision, please review the IRS’ FAQ on the issue here.

For more information about health insurance through the Health Insurance Marketplaces, i.e. the Exchanges, including how to sign up for email updates and tips on how to prepare for open enrollment in October 2013, visit: http://www.healthcare.gov/marketplace/index.html

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