Didn't get health insurance? Prepare to pay $95 fine—at least

Final rule explains penalties for U.S. residents who do not obtain coverage

The Treasury Department on Tuesday released a final rule governing how U.S. residents who fail to comply with the Affordable Care Act's (ACA) individual mandate will be penalized once the provision takes effect in 2014.

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In a fact sheet released in January, HHS said the penalties would apply "only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage." HHS noted that based on Congressional Budget Office estimates, the penalty would be imposed on fewer than 2% of U.S. residents.

Under the final rule, individuals will be required to report whether they had health insurance in 2014 on their fiscal year (FY) 2015 tax returns. Non-exempt individuals who failed to purchase insurance will be required to pay a penalty of:

  • $95 or 1% of the household income, whichever is greater, in 2014; and
  • $695 or 2.5% of taxable annual income, with the total amount increasing with inflation, in 2016 and beyond.

The final rule also outlined exemptions for:

  • Individuals with incomes below the threshold required to file a tax return, or about $10,000 for an individual in 2013;
  • Individuals who already qualify for certain religious exemptions;
  • Members of American Indian tribes;
  • Individuals who lacked insurance for fewer than three months of a given year;
  • Individuals who refused coverage for religious reasons;
  • Members of a health care sharing ministry; and
  • Incarcerated adults.

>> Who will be exempt from the ACA mandate? The final list

Rule clarifies premium subsidies eligibility

The rule released Tuesday also affirmed that low- and middle-income retirees under age 65 who are eligible but not enrolled in employer-sponsored coverage can obtain federal premium subsidies next year to purchase coverage through the ACA's insurance exchanges.

In addition, the rule states that individuals who are eligible but not enrolled in COBRA continuation coverage will similarly be eligible for federal subsidies (Hattem, "RegWatch," The Hill, 8/27; Corbett Dooren, "Washington Wire," Wall Street Journal, 8/27; Geisel, Crain's Business Insurance/Modern Healthcare, 8/27 [subscription required]; Treasury fact sheet, 8/27).

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