The Internal Revenue Service has published the final rule for the individual mandate, one of the most controversial elements of the Affordable Care Act, adding more detail and clarifying some areas around what comprises minimum essential coverage and the shared responsibility to obtain health insurance.
The 75-page rule, released earlier this week and effective today, does not break new ground but mostly finalizes what it proposed in February. The IRS administers those parts of the law related to revenue through collecting penalties.
The individual mandate is intended to encourage individuals to take responsibility for assuring payment for their health care instead of depending on free but uncompensated care from providers, said Timothy Jost, Washington and Lee University law professor.
"It is also intended to stabilize health insurance risk pools by increasing participation by healthy individuals given the fact that guaranteed issue, modified community rating, and the end of pre-existing condition requirements will draw less healthy individuals into the market," he said in a Health Affairs blog.
The individual mandate has different goals from the employer mandate, whose reporting and penalties have been delayed one year until 2015 and is meant to discourage the decline of employer coverage over the long term. The individual mandate "is necessary from the beginning in 2014 to make the insurance reforms work," Jost said.
Four key highlights of the individual mandate include:
• Individuals must have some form of health insurance for themselves and their dependents or pay a penalty.
• Minimum essential coverage may be through Medicare, Medicaid, the health insurance exchange individual market and employer-sponsored coverage. Any employer-sponsored plan is eligible, including self-insured group health plans and, with the changes in the final rule, those offered at a place of employment on behalf of the employer, such as through a union- or professional employer organization-sponsored plan. According to the final rule, "any other plan or coverage offered in the small or large group market with a state," is eligible.
• Some individuals may be exempt from the mandate for a number of hardships, including those who would be eligible for Medicaid but the state chose not to expand Medicaid eligibility, or for those whose income is too low for the most affordable eligible coverage – it costs more than 8 percent of adjusted household income.
• The IRS will collect a fine from individuals who do not obtain coverage at the time they file their income tax forms. If an individual earns too little income to file a tax return, that person is exempt from paying a fine. If the taxpayer does not pay a fine that is due, IRS may not criminally prosecute or impose lien against property, but may deduct it from any tax overpayment refund.
The fines for not having health insurance start out small as a flat dollar amount – $95 – and rise to $325 in 2015 and $695 in 2016. The minimal penalty in the first year is "intended primarily for educational purposes," Jost said.