Individual Shared Responsibility Payment
Sometimes called the “penalty,” “fine,” or “individual mandate.”
This is information is collected from many different sources and those sources are noted when I can find them. I hope those visiting this page find it useful for guidance. It can be very helpful, but in the end, do your own research. Sometimes your CPA can be a good source to check with.
If your health plan is not a Qualified Health Plan or an insurance plan that’s certified by the Health Insurance Marketplace, provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meets other requirements under the Affordable Care Act. All qualified health plans meet the Affordable Care Act requirement for having health coverage, known as “minimum essential coverage.” So if your plan is not a Qualified health plan and you don’t meet any of the many possible exemptions, you may have to pay the Individual Shared Responsibility Payment.
Tens of millions of people opt to not purchase a ACA (Obama Care) plan. Either they are not Minimal Essential Coverage plans or they’re short term plans, or even supplemental plans. Most do this because of cost. They are able to get a plan that has better coverage at a lower cost by cutting out a lot of minimal essential coverage that a lot of people do not need, use, or want to pay for. Comparing the plans that don’t meet the minimal essential coverage to many short term plans, you’ll find that the short term plans have very low benefit levels (a lot of times inadequate levels) allowing the cost of the plan to be very low, but leaving you exposed financially to loss.
So you may opt to purchase a plan that is not a ACA plan, (not Obama Care). Depending on the plan, it is way less expensive and may have better coverages in a lot of areas. In the ACA, it is referred to as “excepted benefit” plan. These plans are purchased by individuals, families, self-employed and small business as individual plans.
So there is a good chance that your plan will not cover mental illness, sex transformations, weight control, abortions, children dental, wellness office visits, and more. But they may have a lot of extra ancillary products built-in that Obama Care plans do not, like critical illness benefits, accident benefits, Accidental Death and Dismemberment, Hospital confinement benefits, CallMD, and many more. And in most cases with lower deductibles before you can use it. Overall they can be much better plans.
On your taxes, where you check the box on whether you have insurance, you are legally allowed to leave that blank (see pdf). Talk to your CPA. See links to some articles below that pertain to your questions. Especially the one where in January the president signed into law that he directs the agency heads to waive penalties pending the repeal of the law (paraphrased, read the article or law).
If you read the law on on healthcare.gov on what happens if you don’t pay the Shared responsibility payment, it says, “There are no liens, levies, or criminal penalties for failing to pay the fee.”
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As Forbes Magazine said in February 2015 article “But real consequences? Other than that potential refund seizure and a guilty conscience, there’s nothing to keep taxpayers from opting out of paying.” http://www.forbes.com/sites/kellyphillipserb/2015/02/26/opting-out-of-the-obamacare-tax
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Trump Signs Executive Order To Roll Back Obamacare Forbes Magazine, January 2017,
“seek the prompt repeal” of ACA. Pending the appeal, the order directs agency heads to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”
The language of the order gives a lot of latitude for the IRS to not enforce the penalty, sometimes called a “shared responsibility payment. An Executive order becomes the law of the land, unless found to be illegal by the high courts. So, this is the law.
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Because of all the big premium increases, a lot of people fit this exemption now
One exemption that a lot of people are eligible to use is: The IRS grants an exemption from the Shared Responsibility Payment if the lowest premium of an available Bronze plan exceeds 8.05% of a (MAGI) Modified Adjusted Gross Household’s Income. Discuss this with your CPA.
Click Here for more details and links to forms and instructions for filing for exemption
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Another exemption that people have had success using is a Hardship Exemption for not having adequate insurance offered through the Marketplace. If the only plans available to you in the Marketplace are HMO’s, and you travel outside your area/state, your health coverage becomes very inadequate and if a health event was to occur, it would cause a severe financial hardship on the family. So, you opted for a non-compliant ACA plan with a nationwide PPO network to insure that your family had adequate coverage at home and when you travel outside your area. So if you travel, this may be an exemption for you. Discuss it with your CPA.
For this Hardship Exemption, you will need to file the Hardship Exemption form. Go to healthcare.gov and search Hardship Exemption, then click Hardship Exemptions and Forms, then click the Exemption Application PDF link and download the form to fill out. Or click the link below.
On the form you will see a list of types of hardships, you will click the last one, “You experienced another hardship” and the date the hardship started will be 01-01-2017 and ended 12-31-2017. For the Explanation: “No Marketplace health insurance plans available to me offer a nationwide PPO network that my family needs. My family and I travel outside the state and not having adequate health coverage would cause a severe financial hardship if we were to need health coverage. A non-compliant ACA plan is available with a nationwide PPO network.”
This application process has seen positive results in receiving exemptions.
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There are many exemptions that people are eligible to use and you can find them on Healthcare.gov. https://www.healthcare.gov/health-coverage-exemptions/exemptions-from-the-fee/
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The Employer Shared Responsibility Payment applies to some businesses with more than 50 full-time employees who don’t offer insurance, or whose coverage doesn’t meet certain minimum standards. Discuss with you CPA.
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What is the penalty if I do not carry health insurance and I don’t qualify for an exemption?
The fee for no having health coverage is calculated in one of two ways, whichever amount is higher. You may be charged a flat fee or a percentage fee which will be applied to your federal income tax returns for the years that you were not insured.
Below are the 2017 fee calculations:
The fee is calculated 2 different ways – as a percentage of your household income, and per person. You’ll pay whichever is higher. The penalty rises yearly with inflation.
Percentage of income, 2.5% of household income, Maximum: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace. Per person, $695 per adult, $347.50 per child under 18, Family Maximum: $2,085
Paying the fee, Using the percentage method, only the part of your household income that’s above the yearly tax filing requirement is counted. Using the per-person method, you pay only for people in your household who don’t have insurance coverage. If you have coverage for part of the year, the fee is 1/12 of the annual amount for each month you (or your tax dependents) don’t have coverage. If you’re uncovered only 1 or 2 months, you don’t have to pay the fee at all. You pay the fee when you file your federal tax return for the year you don’t have coverage. It is taken from your tax refund.
https://www.healthcare.gov/fees/fee-for-not-being-covered/
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How would I qualify for an exemption?
If you qualify for an exemption, you will not be subject to the penalty for being uninsured. Below are some examples of exemptions that may apply to you or your family’s situation:
- You were uninsured for under 3 months of the year
- You don’t meet the income tax filing threshold and so are not required to file.
- You are not lawfully present in the U.S.
- The lowest-priced plan option provided exceeds 8% of your household income
- You are a member of tribe recognized by the federal government
- You are a member of a federally recognized organization with religious objections to insurance, Medicare, Social Security, etc.
- You are currently incarcerated and serving a term in jail or prison
- You qualify for hardship exemption
You can visit healthcare.gov or the IRS online to see more examples that might qualify you for an exemption from being assessed the fee for non-coverage. And you should discuss all your different options with your CPA.
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