IRS sets penalties for patients who skip reform coverage

The Internal Revenue Service has finalized penalties for individuals who do not obtain health insurance under healthcare reform.

Under the final rules, the shared responsibility payment for not maintaining essential coverage under the Patient Protection and Affordable Care Act is based on the greater of either a flat dollar amount or a percentage of household income over the taxpayer's applicable filing threshold.

The penalty for not obtaining coverage is $95 per person or 1 percent of household income in 2014 and jumps to $325 or 2 percent of income in 2015. In 2016, the IRS will fine nonexempt individuals without coverage either $695 or 2.5 percent of household income. After 2016, the penalty will be determined by a cost-of-living formula.

The Congressional Budget Office estimates less than 2 percent of Americans will forgo coverage and owe a shared responsibility payment, according to an IRS fact sheet released Wednesday.

Individuals have minimum essential coverage for a calendar month if they're enrolled in or covered by a health plan for at least one day during that month, according to the final rules. The IRS noted the one-day rule will ease administrative burdens for both taxpayers and the agency.

The IRS final rules do make some exceptions to the individual mandate. Those who will not have to make a shared responsibility payment include:

  • Individuals who cannot afford coverage;
  • Taxpayers with income below the filing threshold;
  • Members of Indian tribes;
  • Individuals who suffer hardship;
  • Individuals who experience short coverage gaps;
  • Members of religious sects or divisions;
  • Members of a healthcare sharing ministry;
  • Incarcerated individuals; and
  • Individuals who are not lawfully present.

"These rules will ease implementation and help ensure that the payment applies 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," the agency said in the fact sheet.

The new rules come a month after the Republican-led U.S. House of Representatives voted to delay the individual mandate for a year. The vote largely followed party lines with 22 Democrats among the 251 votes in favor of delaying the individual mandate while 174 voted against it, FierceHealthcare previously reported.

The IRS has taken some heat this year, thanks to the revelation that agency employees singled out conservative groups for harsh tax-exemption scrutiny. The IRS scandal strengthened the Republican fight against the Affordable Care Act and their complaints of government overreach.

For more:
- here are the final rules (.pdf)
- check out the IRS fact sheet

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