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NATIONAL HEALTH CARE

Individual Mandate -What happens if you don't buy health Insurance

The HEALTH CARE REFORM BILL requires certain individuals to purchase health insurance, else pay a tax penalty on your tax return.

Effective January 1, 2014, applicable individuals will be required to maintain minimum essential coverage for themselves and their dependents.  You are probably wondering;

1. Who are applicable individuals

2. What is minimum essential coverage?

3. How much is the penalty?

1. A person defined as an applicable individual on a monthly basis. For example, you could be an applicable individual in January, but not in February. A person is an applicable individual, unless one of the following circumstances apply:

A. the person has been approved for a religious exemption under SEction 131(d)(4)(H) of the Patient Protection and Affordable Care Act

B. the person is a member of a health care sharing ministry.

C. the person is not a citizen or national of the United States or an alien lawfully present in the United States.

D. the person is incarcerated without any pending disposition of charges.

Simple Translation: A US Citizen is an applicable individual unless he or she is religiously exempt, a member of a health care sharing ministry or in jail.

2. What is minimum essential coverage?

This is the minimum amount of health insurance coverage an applicable individual must purchase to avoid paying the penalty.

Simple Translation: If you have individual health insurance, employer sponsored group health insurance or if you participate in a Sate risk pool Medicare, Medicaid, then you have minimum essential coverage.

3. How much is the penalty?

If an applicable individual does not maintain minimum essential coverage for o or more months during a tax year, then they must pay a penalty.

The size of the penalty is phased in over three years. In 2014, the penalty will be $95 per person up to a maximum of three times that amount for a family, or $285, or 1% of household income if greater. In 2015, the penalty will be $325 per person up to a maximum of three times that amount for a family, $975, or 2% of household income if greater. In 2016, the penalty will be $695 per person per year up to a maximum of three times that amount for a family, $2,085 or 2.5% of household income if greater.

Note: If you claim dependents, you are responsible for making sure they have minimum essential coverage.

Simple Translation: The amount of the penalty depends on a number of factors including your income, the size of  your household and your access to affordable health insurance. In most cases, it will make most economic sense to purchase health insurance versus paying the penalty.