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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.

The individual shared responsibility provision is one of the most controversial and least-popular aspects of the ACA, but it’s necessary in order to allow for the more popular provisions 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.