What is the ACA Individual Mandate Penalty?

With the Patient Protection and Affordable Care Act, or Obamacare, now fully in effect, there is a mandate that every American purchase health insurance or pay a tax as a penalty.  So what is the dollar amount of the ACA individual mandate penalty, and what exactly would need to happen to cause someone to have to pay the penalty?  Lets take a look.

Exemptions from the Individual Mandate Penalty

Not everyone without health insurance that lives in the United States will be required to pay the individual mandate penalty.  If any of the following apply, then the penalty might not be required.

  • Religious opposition to accepting health insurance benefits
  • Membership in an Indian tribe
  • Incarceration
  • Family income below the threshold for filing an income tax return
  • You pay for than 8% of your income for health insurance after employer contributions and tax credits are taken into account
  • Undocumented immigrant

If an individual does not fall into any of those categories, then having insurance from the following sources would then exempt him or her from the individual mandate penalty.

  • Medicare
  • Medicaid or CHIP
  • Employer-sponsored plan
  • Individual insurance that is at least at the Bronze level
  • Veteran’s health program
  • A grandfathered health plan that was in existence before the ACA was enacted

If someone does not have one of those types of insurance plans, then odds are he or she will be required to pay the individual mandate penalty.

How Much is the ACA Individual Mandate Penalty?

The penalty for not having health insurance will increase as the years go by.  For the first 3 years of the law’s existence, the penalty will look like this:

Year Greater of: Adult Child Family Max
2014 1% of family income, or: $95 $47.50 $285
2015 2% of family income, or: $325 $162.50 $975
2016 2.5% of family income, or: $695 $347.50 $2,085



Some key notes:

  • Definition of income: Total income in excess of the filing threshold ($10,000 for individuals, $20,000 for families, in 2013)
  • Penalty is pro-rated by the number of months without coverage
  • A single gap of coverage of less than 3 months will not result in a penalty.  This is of importance for those enrolling in the initial Marketplace Open Enrollment.  The Open Enrollment deadline is March 31, which will start plans on either April 1 or May 1.  For those without coverage on January 1, this would result in a lack of coverage for over 3 months, and would seem to then result in an individual mandate penalty.  However, HHS has said that individuals that fall in this bucket can file a waiver to avoid the penalty.
  • The penalty cannot be greater than the national average of Bronze coverage on the exchanges
  • After 2016 the individual mandate penalty increases by the cost of living index

There are many things to consider when it comes to insuring yourself and your family.  The ACA individual mandate penalty is one of those things.

Source: Healthcare.gov

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