The Patient Protection and Affordable Care Act (ACA) includes a mandate for most individuals to have health insurance or potentially pay a penalty for noncompliance.

Beginning Jan. 1, 2014, individuals will be required to maintain minimum essential coverage for themselves and their dependents.

Minimum essential coverage includes a minimum of any of the following types of health insurance coverage:

  • Employer-sponsored coverage (including COBRA and retiree coverage)
  • Coverage purchased on the individual market
  • Medicare coverage (including Medicare Advantage)
  • Medicaid coverage
  • Children’s Health Insurance Program (CHIP) coverage
  • Certain types of Veterans health coverage
  • TRICARE

Minimum essential coverage does not include specialized coverage such as coverage only for vision care or dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition.

Some individuals will be exempt from the requirement to maintain minimum essential coverage and/or the penalty, while others may be given premium subsidies or cost-sharing reductions to help them pay for the cost of maintaining health insurance.

Individuals exempt from paying penalties for not having health insurance include:

  • Members of certain religious groups
  • Members of Native American tribes
  • People who are incarcerated
  • Undocumented immigrants, who also are not eligible for health insurance subsidies under the ACA
  • People whose income is so low they don’t have to file taxes (currently $9,500 for individuals and $19,000 for married couples)
  • People who cannot afford coverage based on formulas contained in the ACA
  • People who were uninsured for short periods of less than three months
  • People who have received a hardship waiver from the Department of Health and Human Services
  • U.S. citizens who reside outside the United States or are residents of any possession of the United States

The cost of the penalties is low compared to the cost of purchasing health insurance. The penalty an individual pays will be the lesser of the two options for each year presented below:

Year* Penalty
2014
  1. The greater of 1% of the excess of household income over the applicable filing threshold or $95 per uninsured adult and $47.50 per uninsured child up to a limit of $285 per family; or
  2. The sum of the monthly national average bronze plan premiums (as determined by the IRS) for the family
2015
  1. The greater of 2% of the excess of household income over the applicable filing threshold or $325 per uninsured adult and $162.50 per uninsured child up to a limit of $975 per family; or
  2. The sum of the monthly national average bronze plan premiums (as determined by the IRS) for the family
2016
  1. The greater of 2.5% of the excess of household income over the applicable filing threshold or $695 per uninsured adult and $347.50 per uninsured child up to a limit of $2,085 per family; or
  2. The sum of the monthly national average bronze plan premiums (as determined by the IRS) for the family

* After 2016, penalties will be adjusted annually according to the cost of living index.

The ACA does not have an enforcement provision for the individual mandate; no criminal action or liens can be imposed on individuals who do not pay the penalty.