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individual shared-responsibility provision

What is the individual shared-responsibility provision?

  • The individual shared responsibility provision (aka the individual mandate) is a requirement in the ACA that almost all Americans maintain continuous health insurance coverage or face a tax penalty.
  • The penalty is assessed on uninsured Americans when they file their tax returns, although there are a variety of exemptions that tax filers can claim to avoid the penalty.
  • There is still an individual mandate penalty for people who are uninsured in 2018. The penalty for being uninsured in 2018 will be assessed on tax returns that are filed in early 2019.
  • The amount of the penalty in 2018 is unchanged from 2016 and 2017. It’s either $695 per uninsured adult (half that amount for a child), OR 2.5 percent of household income, whichever is greater.
  • The mandate penalty will be eliminated after the end of 2018. The individual mandate itself will remain unchanged, but there will no longer be a penalty for people who don’t comply with it. People who are uninsured in 2019 and future years will not have to pay a penalty when they file tax returns for those years. But the tax returns filed in 2019 (for the 2018 tax year) will still include the penalty.
  • States can implement their own individual mandates, with penalties for non-compliance. Massachusetts has an individual mandate (with a penalty) that pre-dates the ACA. The District of Columbia and New Jersey are close to implementing individual mandate penalties, and other states are considering the possibility of a mandate.
  • In 2018, the Trump Administration made it easier to get hardship exemptions from the individual mandate penalty. The expanded guidelines allow people to get a hardship exemptions if they live in an area with only one insurer offering plans in the exchange (or zero insurers, but every county in the country ended up having exchange plans available for 2018), or if the only available exchange plans include abortion coverage and the person objects to that. Hardship exemptions are also available to people who “experience personal circumstances that create a hardship in obtaining health insurance coverage under a QHP,” because, for example, a specialist who is treating the person is not included on any of the exchange plans’ networks.

The individual shared responsibility provision is one of the most controversial and least-popular aspects of the ACA, but it’s one of the provisions that helps to keep costs in check, despite the more popular (and costly) parts of the ACA — namely the fact that all new plans cover pre-existing conditions and no longer discriminate against people based on their medical histories.

Republican lawmakers spent much of 2017 trying to eliminate the individual shared responsibility penalty, in conjunction with broader efforts to repeal various provisions of the ACA. Those efforts did not prove successful, but GOP lawmakers ultimately included repeal the individual shared responsibility penalty in the tax reform legislation that was enacted in December 2017. The repeal takes effect in 2019: people who are uninsured in 2018 will be subject to the penalty, while those who are uninsured in 2019 will not.

Supporters of the ACA have pointed out that eliminating the penalty for people who go without health insurance will destabilize the health insurance markets, as it will further incentivize healthy people (particularly those who don’t qualify for premium subsidies) to go without coverage, while those who are sick will continue to purchase coverage regardless of whether there’s a penalty in place. In order to remain stable, a health insurance pool has to have a good mix of healthy and sick enrollees — if there are too many sick enrollees and not enough healthy enrollees, the pool will not be sustainable.

The Congressional Budget Office has projected that without the individual mandate (which will be the case starting in 2019), 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 “almost all areas of the country” will continue to have stable individual health insurance markets — indicating that market collapse could indeed happen in some areas. Fortunately, 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.

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