The Individual Mandate: Information and Options

                            The Individual Mandate: Information and Options

The affordable care act became law in 2010 but is just 27 days into the beginning of its practical implementation. The most substantial provisions will roll themselves out this year through January of 2015. The most controversial of which is the individual mandate, since this has been the source of some confusion, here are the basics you should know:

Individual mandate: The ACA requires a shared responsibility mandate. Essentially all citizens must have minimum essential health coverage or be subject to a penalty tax. The basic penalty is $95 if you’re unmarried with no dependents with income around the 15% tax bracket, $19,500. However if you’re income is higher you’ll owe more, 1% of the amount by which your income exceeds the sum of a single person’s personal exemption in the federal income tax. In short for example, if you earn $30,000 your penalty is actually $200.

The real crunch though, will likely be felt by married persons with dependents. If you’re married or have children, you’ll owe a minimum of $95 per person for yourself, your spouse, and each dependent over age 17 plus half that amount for each child under 18. Just as before, 1 percent of your income that exceeds you and your spouse’s personal exemptions will be added to this penalty, in addition you’ll have to include your dependents’ income in the calculation, the estimate for these filers is about $385.

Keep in mind two very important things in regards to the penalty tax: (1) income refers to adjusted gross income. And (2) these penalties are just for 2014. The dollar minimums will be $325 in 2015 and $695 in 2016 and will grow with inflation after that.

Independent of signing up for health coverage, there are a few citizens who will be exempt from required participation:

You’re safe if you:

1.    have religious objections to health insurance

2.    Are an American Indian

3.    Are in jail, or

4.    Are “not lawfully present” in the U.S., among other reasons.

5.    You’re also protected if buying insurance would impose economic hardship. Sounds like a fairly good idea right? Not so much, for you to fall within what the fed defines as economic hardship the penalty would have to exceed 8 percent of your income, your income then, would have to be less than $5,000 per person- in most cases that alone is a much bigger conversation.

 

Employers will soon be mandated to offer coverage, but that deadline has been extended to next year.  

Simone is a registered investment adviser representative. FINRA CRD: 6143314.

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