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Individual Mandate Penalty

Individual Mandate Penalty

The individual mandate, officially referred to as shared liability insurance, requires virtually all U.S. citizens and legal residents to have health insurance.

It is part of the Affordable Care Act, and from 2014 to 2018, a fine, assessed by the IRS, was imposed on people who failed to fulfill their mandate, unless they could benefit from the exemption from the penalty.


Federal Mandate Penalty is $0 As At 2019

Under the TCJA Act passed by Congress at the end of 2017, the individual mandate sanction was lifted from 2019. Persons uninsured in 2018 were subject to sanctions when filing tax return taxes at the beginning of 2019 unless they have been exempted.

But people who were uninsured in 2019 should not be fined for tax returns filed in early 2020, as they will continue to be in the years to come unless they are in a state which imposes its penalties. D.C., New Jersey, and Massachusetts imposed an individual mandate penalty in 2019, and it continues to apply. California and Rhodes Island implemented individual mandates starting in 2020, so residents of those states will receive penalties for 2020 tax returns (filed in early 2021) if they are uninsured in 2020. 

The ACA's mandate has not been lifted, so almost everyone must maintain health insurance from a technical standpoint. And the mandatory hardship exemption remains important to allow people over 30 to subscribe to catastrophic health insurance (without hardship exemption, disaster plans can only be taken out by people under 30). But there is no longer a federal sanction for non-compliance with the individual mandate.


The Background of the Individual Mandate

The individual mandate has constantly been a controversial part of the Affordable Care Act. Although the law has been debated in Congress and the years since its passage, opponents have argued that the government should not sanction people for not buying something. The constitutionality of the individual mandate was challenged in the Supreme Court. 

The Federal Supreme Court ruled that the individual warrant's sanction was, in fact, a tax on people who did not have health insurance. Because the government has the power to tax its citizens, the Federal Supreme Court has ruled that the individual mandate is constitutional.

 

How the Individual Mandate Works

Some individuals are absolved from the individual mandate, but most Americans fall under its mandate and are sanctioned for non-compliance if they were uninsured between 2014 and 2018. People who have not been insured and are not entitled to an individual mandate exemption have to pay for joint liability when they filed federal income tax returns during the time frame.

To help people fulfill their individual mandate, the Affordable Care Act (ACA) required creating health insurance subsidies or markets where people can purchase health insurance.

The ACA has also provided grants that keep the premiums affordable for people with household income below 400% of the poverty line (around $ 103,000 for a family of four covering purchases by 2020) and grants that cover expenses. Direct payments are more affordable for people with family income below 250% of the poverty line (or $ 64,375 for a family of four in 2020).

The ACA has also called for extending Medicaid to all people whose household incomes reach 138 percent of the poverty line, to provide low-cost health care to low-income Americans. But the Supreme Court has ruled that the expansion of Medicaid is optional and that 15 states have yet to expand Medicaid as of early 2020.

In 14 states, people below the poverty line find themselves in the coverage gap without realistic access to health insurance. However, they have always been exempt from the individual fine because there is a specific exemption for individuals who would be eligible for Medicaid, but who live in a state that has not expanded Medicaid.


How many people owe a Penalty?

In early 2016, the IRS reported that for the 2014 coverage year, 7.9 million taxpayers reported a total of $ 1.6 billion in joint liability penalties, which averaged to $210 per taxpayer. 

On the other hand, 12.4 million taxpayers were not insured in 2014 either, but they requested one of the exemptions and were therefore not subject to the sanction.

With the increase in the number of people who obtained medical coverage in 2015, the number of people subject to the sanction decreased. The IRS reported that 6.5 million people owed the fine for not having insurance in 2015, but the fines were significantly higher (an average of $ 470).


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