466 / What is the ACA requirement to maintain minimum essential health coverage?

Editor’s Note: The 2017 tax reform legislation repealed the Affordable Care Act individual mandate that required individuals to purchase health insurance or pay a penalty for tax years beginning after December 31, 2018. The employer mandate and reporting requirements were not repealed. Late in 2019, the 5th Circuit Court of Appeals held that the individual mandate was unconstitutional. The rest of the ACA continues to be effective.

For taxable years ending after December 31, 2013, the ACA required an applicable individual to ensure that the individual, and any dependent of the individual who is an applicable individual, was covered under a health insurance plan that provided minimum essential coverage or else pay a penalty.¹

Applicable individual means, with respect to any month, an individual other than individuals who have religious exemptions, individuals not lawfully present in the United States, and incarcerated individuals.²

No penalty was imposed on an individual who falls under one of the following exemptions:

(1)     an individual whose required contribution for coverage for the month exceeds 8 percent (as indexed after 2014, 8.05 percent in 2015, 8.13 percent in 2016, 8. 16 percent in 2017, and 8.05 percent in 2018—the penalty does apply after 2018)³ of the individual’s household income for the most recent taxable year (household income is increased by any exclusion from gross income for any portion of the required contribution made through a salary reduction arrangement);

(2)     taxpayers with income that is less than the amount of the tax exemption on gross income specified in Section 6012(a)(1);

(3)     members of Indian tribes;

(4)     months during short coverage gaps (generally, any month the last day of which occurred during a period in which the applicable individual was not covered by minimum essential coverage for a continuous period of fewer than three months); and

(5)     any applicable individual who for any month is determined by the Secretary of Health and Human Services to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.⁴