Repeal of the Individual Mandate

Health insurance, which has always been a topic surrounded by confusion, is doubly complicated as coverage requirements have evolved in recent years. Among the most significant changes was the individual mandate that was put into place under the Obama administration.

Is the Tax penalty for NOT having health insurance still in affect?​

So what’s really going on with the tax penalty for NOT having health insurance? With President Trump’s Tax Cuts and Jobs Act of 2017, there is a provision within this law that eliminates the “individual mandate”, meaning you are no longer required to buy a health plan or pay a tax for not having a “qualified health plan”.

On December 22, 2017, President Trump signed a bill that repealed the ACA’s tax penalty for not having a “Qualified Health Plan”. That repeal doesn’t take effect until 2019. This bill did several things, but most importantly, it removed the penalty for not having health insurance for tax year 2019.

This removal of the penalty, however, doesn’t begin until 2019, so for all you folks that have already dropped your coverage in 2018, you will be in for an unhappy little tax penalty surprise come tax time. It’s best to stay covered if you can afford to. This law does not remove the ACA, also known as Obamacare, but just the tax penalty if you don’t have a “qualified health plan”. In late 2018 when “open enrollment” comes around for 2019, you can decide to stay insured, or take your chances and not have insurance, but you can’t be taxed in tax year 2019 for not having health insurance.

Rates are likely to go up in 2019

Nearly 12 million people selected or were automatically re-enrolled in a health insurance program in the ACA marketplace for 2018. However, with the individual mandate gone, many experts believe that there may be a drop in enrollment in 2019. This may result in higher premiums and fewer choices for those who wish to remain insured.

The likelihood of fewer healthy people enrolling into qualified health insurance plans in 2019 will increase, and those with pre-existing conditions that feel like they cannot go without coverage will probably keep their coverage and re-enroll. This is certain to drive prices higher than they have already been driven. We’ve seen rates more than double in some counties here in Nevada, and for the rates to be driven higher will be a true concern for Nevadans.

What Does That Mean for You?

Sure, you could forego insurance without a tax penalty in 2019, but should you? Before you decide that you’d rather save the money you’d otherwise spend on a premium, it’s important to consider the high cost of health care. No matter how healthy you are, your situation could change overnight. Are you prepared to handle the tens of thousands of dollars in hospital bills that you could potentially be faced with if you became very sick or injured?

Before deciding to roll the dice and decline health insurance coverage, talk to an insurance agent to learn about your options.

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Understanding the Individual Mandate

Prior to the ACA, health insurance companies could keep their premiums affordable by declining coverage for applicants with pre-existing conditions. When the ACA took effect, insurers no longer had this option, and suddenly, thousands of people who had been ineligible for health insurance could sign up for a policy that would cover pre-existing conditions.

To ensure that the cost of health insurance didn’t go through the roof when the market was suddenly inundated with people who would cost insurers more money, the ACA required that everyone, including healthy people, purchase qualifying health insurance coverage to balance it out. This policy was enforced through the individual shared responsibility mandate.

Who Does the Individual Mandate Apply To?

The individual shared responsibility mandate, commonly referred to as a tax penalty, applied to U.S. citizens of all ages, including children. Anyone who claimed a child as a dependent on their federal tax return would be responsible for paying a tax penalty if that child didn’t have proper health insurance coverage.

There were a few exemptions available for people who met certain criteria. Members of certain religious sects that were opposed to accepting any health insurance benefits, including those issued by the state or federal government, could file for an exemption from the individual mandate, as could those whose projected income made purchasing health insurance impossible or those who were ineligible for Medicaid.

What Happened to the Individual Mandate?

While the Affordable Care Act brought a lot of positive changes to the health insurance industry, the individual mandate was always among the most contentious parts of the bill. In late 2017, the Tax Cuts and Jobs Act eliminated the individual mandate penalty starting in 2019, stating that the government did not have the constitutional right to penalize citizens for not purchasing something.

While there is still technically a requirement on the books that every U.S. citizen, with a few exceptions, has health insurance, going forward, this policy is no longer enforceable through a tax penalty. It’s also important to note that the elimination of the penalty begins in 2019. Those who didn’t have health insurance in 2018 will still pay the penalty.