Starting in January 2014, the Affordable Care Act will implement individual shared responsibility in order to keep consumer protections affordable. Individuals who only purchase insurance when they are ill and cancel their insurance when they are well will attribute to raising premiums for everyone. In order to discourage this and keep insurance affordable, the individual shared responsibility provision calls for each individual to have minimum essential health coverage (known as minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.
I recently read an article from US Small Business Administration by Meredith K. Olafson that discusses the responsibilities self-employed individuals have to help improve the availability, quality, and affordability of health insurance coverage: http://www.sba.gov/community/blogs/community-blogs/health-care-business-pulse/self-employed-what-you-need-know-about-individual-shared-responsibility-starting-january-2014. This article defines “minimum essential coverage,” discusses a few exemptions, and provides more information on payments and links to other helpful sites. Here’s what you need to know:
Under the final regulations, minimum essential coverage includes, at a minimum, all of the following:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare Part A coverage
- Medicaid coverage
- Children’s Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
- TRICARE
A gap in coverage may also substantiate responsibility to pay, but if you experience less than three consecutive months of coverage gap, you will be exempt from payment. The regulations also provide that an individual is treated as having coverage for a month so long as he or she has coverage for any one day of that month.
Some situations may qualify for exemption based on hardship, including:
- Individuals who the new Health Insurance Marketplace projects will have no offer of affordable coverage; and
- Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility. This rule will protect individuals in states that decline to expand Medicaid eligibility.
(Hardship exemption cases will be evaluated on a case-by-case basis.)
Congressional Budget Office estimates that less than two percent of Americans will owe a shared responsibility payment.
Still have questions? Check out the IRS info page for the individual shared responsibility provision here: http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision
About the Author
Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency’s education and outreach efforts around health care and the Affordable Care Act.
