The health insurance mandate has been one of the most controversial changes created by Obamacare. The requirement states that all Americans must have at least minimal comprehensive health insurance coverage by January 1, 2014 or pay a penalty to the IRS. The self-employed individual is not exempted from the mandate: The mandate applies whether you are a sole proprietor, LLC or corporation.
To comply with the mandate you must have one of the following health care plans:
- A plan obtained through your state health insurance exchange
- Any individual insurance plan you had prior to the mandate
- Any employer plan including COBRA
- Medicare, Medicaid or Children’s health insurance program (CHIP)
- TRICARE
- Health insurance programs for veterans.
Health insurance credits are only available when you buy through your state exchange.
Health Insurance Mandate Exception
The following are exempted from the mandate:
- People with financial hardship:
- Income limitations: Anyone who would have to pay more than 8% of his or her household income just to get minimal coverage will be exempt. You are also exempt if you earn so little that you do not have to file a tax return. Also you are exempt if you qualify for Medicaid
- People with genuine religious objection
- American Indians
- Incarcerated people
Penalty for non-conformance
If you are not exempted, you must have health insurance coverage by January 1, 2014 for you and your dependents. There is a shared responsibility payment (penalty) due for those who refuse to get life insurance. The penalty is based on household income. If you are uninsured for less than 3 months in the year, you are exempted from the penalty. For 2014, the penalty is $95 per adult and $47.50 per child (up to $285 per family) or 1% of your income whichever is greater.
The penalty amounts will be indexed for inflation but may not exceed the bronze level health plan available on your state exchange.
The penalty is enforced by the IRS and the penalty is collected as an unpaid tax when you file your tax return. On the other hand, the IRS cannot levy against your assets to collect the penalty, nor can it charge interests on the amount you owe from the penalty. The only way the IRS can legitimately collect the penalty is by withholding it from your tax refund.