What You Should Know About the Individual Shared Responsibility Provision This Year
By Drew Hartley
When the Affordable Care Act (ACA) was written, lawmakers knew it would be essential to get healthy people enrolled in coverage. To have a stable health insurance pool, there needed to be enough low-cost enrollees, i.e., often healthy people, to balance out the less healthy, higher-cost enrollees. To accomplish this, lawmakers included an individual mandate, otherwise known as the individual shared responsibility provision.
This controversial provision stipulates that people who don’t have https://www.healthinsurance.org/glossary/minimum-essential-coverage/ minimum essential coverage or qualify for a coverage exemption are subject to a tax penalty. The tax penalty is being eliminated after the end of 2018, although the individual mandate itself will remain in effect. People who are uninsured in 2019 and future years will not have a penalty when they file tax returns for those years, other than they’ll be without coverage if they eventually need medical care. The continued existence of the mandate, but without the penalty, is the source of the https://www.healthaffairs.org/do/10.1377/hblog20180910.861789/full/ Texas v. Azar case, in which 20 states are currently suing the federal government, challenging the constitutionality of the mandate without the penalty and arguing the entire ACA should be overturned if the mandate is unconstitutional.
Tax returns filed in 2019 (for the 2018 tax year) will still include penalty assessments. So, even though the penalty is being eliminated after 2018, you’ll need to understand how it works if you were uninsured in 2018. Check before you file your taxes if you need to make a payment.
To give you a glimpse of the effects of the penalty nationally, the penalty for being uninsured in 2016 was assessed when tax returns were filed in 2017. The https://www.treasury.gov/tigta/auditreports/2017reports/201740028fr.pdf IRS published preliminary data showing penalty amounts on tax returns filed by March 2, 2017, when there were still several weeks remaining in the tax filing season. At that point, 1.8 million returns had been filed that included a penalty, and the total penalty amount was $1.2 billion – an average of about $667 per filer who owed a penalty.
Logically, it is anticipated that due to the lack of a penalty being enforced, the number of individual policies purchased during the open enrollment period for the 2019 calendar year will decrease. Currently, roughly 14.4 million Americans purchase individual policies. The Congressional Budget Office has projected that without the individual mandate, premiums in the individual market will increase by an additional 10 percent per year, roughly 13 million fewer people will have health insurance by 2027 and market collapse could happen in some areas. Currently though, the ACA’s premium subsidies make coverage affordable for many people who would otherwise go uninsured, and this will help to prevent a market collapse, even after the individual mandate penalty is eliminated.
About Drew Hartley
Drew Hartley joined Freeman Health System in 2007 as the Business Development Manager. His responsibilities include development of new business opportunities, physician and community hospital relations, promotion of insurance products contracted with Freeman and oversight of direct contracting with self-funded employers. Drew is a past chairman of the Young Professionals Network and past president of Joplin Daybreak Rotary.