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CRS Updates Report on ACA Individual Healthcare Mandate

MAR. 4, 2014

R41331

DATED MAR. 4, 2014
DOCUMENT ATTRIBUTES
Citations: R41331

 

Annie L. Mach

 

Analyst in Health Care Financing

 

 

March 4, 2014

 

 

Congressional Research Service

 

7-5700

 

www.crs.gov

 

 

Summary

Beginning in 2014, ACA requires most individuals to maintain health insurance coverage or otherwise pay a penalty. Specifically, most individuals will be required to maintain minimum essential coverage, which is a term defined in ACA and its implementing regulations and includes most private and public coverage (e.g., employer-sponsored coverage, individual coverage, Medicare, and Medicaid, among others). Some individuals will be exempt from the mandate and the penalty, while others may receive financial assistance to help them pay for the cost of health insurance coverage and the costs associated with using health care services.

Individuals who do not maintain minimum essential coverage and are not exempt from the mandate will have to pay a penalty for each month of noncompliance with the mandate. The penalty is the greater of a flat dollar amount or a percentage of applicable income. In 2014, the annual penalty is the greater of $95 or 1% of applicable income; the penalty increases in 2015 and 2016 and is adjusted for inflation thereafter. The penalty will be collected through federal income tax returns. The Internal Revenue Service (IRS) can attempt to collect any owed penalties by reducing the amount of an individual's tax refund; however, individuals who fail to pay the penalty will not be subject to any criminal prosecution or penalty for such failure. The Secretary of the Treasury cannot file notice of lien or file a levy on any property for a taxpayer who does not pay the penalty.

Certain individuals will be exempt from the individual mandate and the penalty. For example, individuals with qualifying religious exemptions and those whose household income is below the filing threshold for federal income taxes will not be subject to the penalty. ACA allows the Secretary of Health and Human Services (HHS) to grant hardship exemptions from the penalty to anyone determined to have suffered a hardship with respect to the capability to obtain coverage. The Secretary of HHS has identified a number of different circumstances that would allow individuals to receive a hardship exemption, including an individual not being eligible for Medicaid based on a state's decision not to carry out the ACA expansion and financial or domestic circumstances that prevent an individual from obtaining coverage (e.g., eviction or recent experience of domestic violence).

ACA includes several reporting requirements designed, in part, to assist individuals in providing evidence of having met the mandate. Every person (including employers, insurers, and government programs) that provides minimum essential coverage to any individual must provide a return to the IRS that includes information about the individual's health insurance coverage.

On February 28, 2014, H.R. 4118, Suspending the Individual Mandate Penalty Law Equals Fairness Act, was referred to the House Committee on Ways and Means. H.R. 4118 provides that individuals do not have to pay an individual mandate penalty for any month prior to January 1, 2015, effectively delaying implementation of the individual mandate penalty and maintaining the initial penalty levels until 2015.

                               Contents

 

 

 Individual Mandate

 

 

      Minimum Essential Coverage

 

 

      Penalty

 

 

           Illustrative Individual Mandate Penalties

 

 

      Exemptions

 

 

           Claiming an Exemption

 

 

      Failure to Pay Penalty

 

 

 Potential Financial Assistance

 

 

 Reporting Minimum Essential Coverage

 

 

                                Tables

 

 

 Table 1. Individual Mandate Exemptions under ACA

 

 

 Table A-1. Types of Health Insurance Coverage as they Relate to the

 

            Definition of Minimum Essential Coverage and the

 

            Individual Mandate Penalty in 2014

 

 

                              Appendixes

 

 

 Appendix A. Health Insurance Coverage and the Individual Mandate

 

 

                               Contacts

 

 

 Author Contact Information

 

 

 Acknowledgments

 

 

This report describes the individual mandate as established under the Affordable Care Act (ACA, P.L. 111-148, as amended).1 The report also discusses the ACA reporting requirements designed, in part, to assist individuals in providing evidence of having met the mandate.

Individual Mandate

Beginning in 2014, ACA requires most individuals to have health insurance coverage or potentially pay a penalty for noncompliance.2 Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Some individuals will be exempt from the mandate and the penalty, while others may receive financial assistance to help them pay for the cost of health insurance coverage and the costs associated with using health care services.

Minimum Essential Coverage

In general, individuals who are not exempt from the mandate must maintain minimum essential coverage to avoid the penalty. Minimum essential coverage is defined broadly in statute and is further defined in regulations; the definition includes most types of government-sponsored coverage (e.g., Medicare) as well as most types of private insurance (e.g., employer-sponsored insurance). Table A-1 in provides detailed information about how different types of health insurance coverage relate to the definition of minimum essential coverage and the penalty. Minimum essential coverage does not include health insurance coverage consisting of excepted benefits, such as dental-only coverage.

Penalty

With some exceptions, individuals will be required to maintain minimum essential coverage for themselves and their dependents.3 Those who do not meet the mandate may be required to pay a penalty for each month of noncompliance. The penalty will be calculated as the greater of either:

  •  

    1. a percentage of the "applicable income," defined as the amount by which an individual's household income exceeds the applicable filing threshold for the applicable tax year.4 The filing threshold comprises the personal exemption amount (doubled for those married filing jointly) plus the standard deduction amount,5

  • the percentage will be 1.0% in 2014, 2.0% in 2015, and 2.5% thereafter, or

  • 2. a flat dollar amount assessed on each taxpayer and any dependents (e.g., family)

  • the annual flat dollar amount phased in -- $95 in 2014, $325 in 2015, and $695 in 2016 and beyond (adjusted for inflation),6 assessed for each taxpayer and any dependents;

  • the amount is reduced by one-half for dependents under the age of 18;

  • the total family penalty is capped at 300% of the annual flat dollar amount.

 

The penalty for noncompliance cannot exceed the national average premium for bronze-level-qualified health plans offered through exchanges (for the relevant family size).7 Any penalty that taxpayers are required to pay for themselves or their dependents must be included in their return for the taxable year. Those individuals who file joint returns are jointly liable for the penalty.

Illustrative Individual Mandate Penalties

The following examples illustrate the penalty for a single individual and for a family of four. Penalty amounts are shown for 2014, 2015, and 2016. To summarize the penalty (as described above) for those individuals whose household income is above the filing threshold amount for federal income tax, the penalty is the greater of a flat dollar amount or a percentage of applicable income (income above the filing threshold). Individuals below the filing threshold for federal income tax will not pay a penalty.

In these examples, the 2013 filing threshold was used, which is $10,000 for a single individual under age 65 with no dependents (single filing status) and $20,000 for a married couple filing jointly. The filing thresholds are linked to an inflation adjustment based on the CPI-U,8 and therefore will likely be higher when implemented in 2014 and in subsequent years (thus exempting people with slightly higher income) than shown here. As a result, the numbers below are meant for illustrative purposes only. These examples are best used to show the relative scope of the penalties and the relationship between the various components of the formulas for calculating the penalty.

Illustrative individual mandate penalties for a single individual with no dependents:

  • In 2014, those with income above the filing threshold ($10,000 in 2013) but at or below $19,500 will pay the $95 flat amount, those with income above $19,500 and below the cap at the national average premium for bronze-level coverage will pay 1% of applicable income;

  • In 2015, those with income above the filing threshold ($10,000 in 2013) but at or below $26,250 will pay the $325 flat amount, and those with income above $26,250 and below the cap at the national average premium for bronze-level coverage will pay 2% of applicable income;

  • In 2016, those with income above the filing threshold ($10,000 in 2013) but at or below $37,800 will pay the $695 flat amount, and those with income above $37,800 and below the cap at the national average premium for bronze-level coverage will pay 2.5% of applicable income.

 

In calculating the penalty for a family, each of the components of the formula increases for a family, including the filing threshold, flat dollar amount, and the cost of a bronze-level plan. However, the flat dollar amount for a family cannot be greater than three times the amount for an individual. For example, in 2014 the flat dollar amount is limited to three times $95, or $285. The flat dollar amount is one-half for children under 18, so that a married couple with two children under 18, a single parent with four children under 18, as well as larger families are all subject to the same flat dollar maximum amount. However, these families may still pay larger penalties, if they have higher incomes.

Illustrative individual mandate penalties for a family of four (married couple with two children under age 18):

  • In 2014, those with income above the filing threshold ($20,000 in 2013) but at or below $48,500 will pay the $285 flat dollar amount, those with income above $48,500 and below the cap at the national average premium for bronze-level family coverage will pay 1% of applicable income;

  • In 2015, those with income above the filing threshold ($20,000 in 2013) but at or below $68,750 will pay the $975 flat dollar amount, those with income above $68,750 and below the cap at the national average premium for bronze-level family coverage will pay 2% of applicable income;

  • In 2016, those with income above the filing threshold ($20,000 in 2013) but at or below $103,400 will pay the $2,085 flat dollar amount, those with income above $103,400 and below the cap at the national average premium for bronze-level family coverage will pay 2.5% of applicable income.

 

Exemptions

Certain individuals (and their dependents) may be exempt from the penalty. These individuals include those whose household income is less than the filing threshold for federal income taxes for the applicable tax year (filing threshold exemption), as well as those whose required contribution for self-only coverage9 for a calendar year exceeds 8% of household income (affordability exemption).10 After 2014, this percentage will be adjusted to reflect the excess rate of premium growth above the rate of income growth for the period.

Certain categories of individuals will be exempt from the individual mandate, including those with qualifying religious exemptions,11 those in a health care sharing ministry,12 individuals not lawfully present in the United States, and incarcerated individuals (except those pending the disposition of charges). No penalty will be imposed on those without coverage for less than three months13 or members of Indian tribes.14 Qualifying individuals who would otherwise be subject to the mandate, but who live abroad for at least 330 days within a 12-month period, as well as bona fide residents of any possession of the United States will be considered to have minimum essential coverage and therefore not be subject to the penalty. Any individual whom the Secretary of Health and Human Services (HHS) determines to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan will be exempt (see the text box for more information about the hardship exemption).

The Internal Revenue Service (IRS) issued guidance that provides "transitional relief" from the penalty for individuals (and any dependents) who were eligible for non-calendar year employer-sponsored insurance plans in 2013.15 For example, consider an individual who was eligible to enroll in his/her employer's health plan, whose plan year began on September 1, 2013, and ends on August 31, 2014. Under the transitional relief, the individual is not liable for the individual mandate penalty for January 2014 through August 2014, as the individual would have had to enroll in the employer-sponsored plan in 2013 in order to be covered by the plan in those months of 2014.

Additionally, the IRS has issued guidance that provides that individuals enrolled in certain types of coverage that are not considered minimum essential coverage will not be liable for a penalty.16 For example, women who only receive pregnancy-related services under Medicaid do not have minimum essential coverage, but IRS indicates that these women will not be liable for a penalty in 2014. These "exemptions" from the penalty are not discussed in the "Claiming an Exemption" section of this report; however, they are identified in Table A-1 in the Appendix of this report.

 

Hardship Exemption

 

 

Any individual whom the Secretary of HHS determines has suffered a hardship with respect to the capability to obtain health insurance coverage will receive a hardship exemption. Through regulations and guidance, HHS has identified a number of circumstances that would allow individuals to receive a hardship exemption:17

 

(1) an individual experiences financial, domestic, or other circumstances that prevent him/her from obtaining coverage or the expense of purchasing coverage would have caused him/her to experience serious deprivation of food, shelter, clothing, or other necessities;18

(2) an individual is unable to afford coverage based on projected household income;

(3) an individual whose income is below the filing threshold (and therefore eligible for the filing threshold exemption), except that the individual claimed a dependent with a filing requirement and had household income exceeding the filing threshold as a result;

(4) an individual is ineligible for Medicaid based on a state's decision not to carryout the ACA expansion;

(5) an individual is identified eligible for affordable self-only employer-sponsored insurance (ESI), but the aggregate cost of the ESI for all the employed members of the family exceeds 8% of household income;

(6) an individual is an Indian eligible for services through an Indian health care provider, but is not eligible for an exemption based on being a member of an Indian tribe, or is eligible for services through the Indian Health Service;

(7) an individual who enrolls in a plan offered through an exchange prior to the close of the open enrollment period (March 31, 2014) will be able to claim a hardship exemption for the months prior to the effective date of the individual's coverage;19 or

(8) an individual has been notified that his/her plan will not be renewed and believes that the available plan options are more expensive than the plan that was not renewed.20

 

Individuals who claim hardship exemptions are eligible to purchase catastrophic plans. Under ACA, catastrophic plans must cover a comprehensive set of benefits, but they do not have to comply with the same cost-sharing requirements with which other plans must comply under ACA. As a result, these plans typically have lower premiums because they have higher cost-sharing. Only individuals who are either under age 30 or eligible for a hardship or affordability exemption from the individual mandate are eligible to enroll in catastrophic plans.21

Claiming an Exemption

Individuals can be exempt from the mandate and the penalty based on an individual's characteristics, financial status, or affiliations (e.g., religious affiliations). Some individuals who are exempt will not be expected to take any actions to claim the exemption; others will have to either obtain a certification of exemption from a health insurance exchange or claim the exemption through the tax filing process.

Individuals who live abroad for more than 330 days in a 12-month period and those who are bona fide residents of a U.S. possession do not have to take any action to claim the exemption. Those claiming the short coverage gap, unlawfully present, filing threshold, or affordability exemptions may only do so on their federal income tax return. In order to claim a religious exemption an individual must obtain an exemption certification issued by the exchange serving the area in which the individual resides. Some types of hardship exemptions can be claimed by receiving a certification from an exchange, while other types can only be claimed through the tax filing process.22 All other exemptions may be certified by an exchange or may be claimed on the filer's federal income tax return.23

Regulations provide that most exemptions be applicable retrospectively (with an exception for a specific hardship definition) and be recertified annually; only the religious and Indian tribe exemptions are eligible for prospective or retrospective applicability and continuous certification. Table 1 outlines the basic features of the nine exemption categories.

           Table 1. Individual Mandate Exemptions under ACA

 

 _____________________________________________________________________

 

 

                Eligibility

 

 Exemption      Certification    Applicability       Recertification

 

 _____________________________________________________________________

 

 

 Religious      Exchange only    Prospective or      Continuousa

 

 conscience                      retrospective

 

 

 Hardship       Exchange or      Retrospectiveb      Annual

 

                tax filing

 

 

 Health care    Exchange or      Retrospective       Annual

 

 sharing        tax filing

 

 ministry

 

 membership

 

 

 Indian tribe   Exchange or      Prospective or      Continuous

 

 membership     tax filing       retrospective

 

 

 Incarceration  Exchange or      Retrospective       Annual

 

                tax filing

 

 

 Affordability  Tax filing       Retrospective       Annual

 

                only

 

 

 Unlawful       Tax filing       Retrospective       Annual

 

 resident       only

 

 

 Coverage gap   Tax filing       Retrospective       Annual

 

                only

 

 

 Filing         Not              Retrospective       Annual

 

 threshold      applicablec

 

 _____________________________________________________________________

 

 

 Sources: 45 CFR Part 155 and 26 CFR Part 1.

 

 

 Note: The "exemptions" for qualifying individuals who

 

 live abroad for at least 330 days within a 12 month period and bona

 

 fide residents of any possession of the United States are not

 

 included in this table because individuals who meet one of these

 

 criteria do not need to take any action to comply with the individual

 

 mandate.

 

 

                              FOOTNOTES TO TABLE 1

 

 

      a Reapplication for the exemption is required when an

 

 individual reaches age 21. See 45 CFR § 155.605(c).

 

 

      b One type of hardship exemption is available

 

 prospectively; it is available to individuals for whom qualifying

 

 coverage is unaffordable based on projected income.

 

 

      c Individuals who qualify for a filing threshold

 

 exemption are not required to file a tax return or apply to an

 

 exchange to claim the exemption; these individuals are automatically

 

 exempt and do not need to take further action to secure an exemption.

 

 However, if the individuals choose to file a return they may claim

 

 the exemption on the return.

 

END OF FOOTNOTES TO TABLE 1

 

 

Failure to Pay Penalty

Taxpayers who are required to pay a penalty but fail to do so will receive a notice from IRS stating that they owe the penalty. If they still do not pay the penalty, the IRS can attempt to collect the funds by reducing the amount of their tax refund for that year or future years. However, individuals who fail to pay the penalty will not be subject to any criminal prosecution or penalty for such failure. The Secretary of the Treasury cannot file notice of lien or file a levy on any property for a taxpayer who does not pay the penalty.

Potential Financial Assistance

While ACA requires most individuals to maintain minimum essential coverage, it provides financial assistance to some individuals to help them meet the requirement. Under the ACA Medicaid expansion, some states have expanded their Medicaid programs to include all nonelderly, non-pregnant individuals with income below 133% of the federal poverty level (FPL), which is expected to significantly increase Medicaid enrollment.24 Beginning in 2014, some individuals who do not qualify for Medicaid coverage, but who meet other ACA requirements, will be provided with subsidies to help pay for the premiums and cost-sharing requirements of health plans offered through an exchange.25

Reporting Minimum Essential Coverage

ACA requires that information be provided to the IRS and to individuals, in part to ensure that they have both knowledge and proof of meeting the individual mandate. Every person (including employers, insurers, and government programs) that provides minimum essential coverage to any individual must provide a return to the IRS (as described below).26 That person must also provide this information to each primary insured person along with contact information.

The return must include:

  • the name, address, and tax identification number of the primary insured and others covered under the policy;

  • the period for which each individual was provided with coverage;

  • whether or not the coverage is a qualified health plan offered through an exchange and, if so, the amount of any advance payment of any cost-sharing reduction or any premium tax credit;

  • for coverage provided through the group plan of an employer, the portion of the premium, if any, paid by the employer; and

  • other information required by the Secretary of the Treasury.

 

Reporting entities were required to begin submitting returns in 2014; however, on July 9, 2013, the Department of Treasury published a notice that delays this reporting requirement until 2015.27 The notice encourages reporting entities to voluntarily comply with the provision in 2014.

Appendix A. Health Insurance Coverage and the Individual Mandate

  Table A-1. Types of Health Insurance Coverage as they Relate to the

 

             Definition of Minimum Essential Coverage and

 

                the Individual Mandate Penalty in 2014

 

 

          As Identified in Statute, Regulations, and Guidance

 

 _____________________________________________________________________

 

 

                                                        If it is an

 

                                                        individual's

 

                                                        only source of

 

                                                        coverage in

 

                                                        2014, is the

 

                                                        individual

 

                                                        liable for the

 

                                                        individual

 

 Type of Coverage         Is it considered minimum      mandate

 

                          essential coverage in 2014?   penalty?

 

 _____________________________________________________________________

 

 

 Medicare Part A                    Yes                     No

 

 

 Medicare Advantage                 Yes                     No

 

 

 Medicaid full benefit              Yes                     No

 

 coverage

 

 

 Medicaid limited

 

 benefit coverage

 

 

      Optional                      No                      No

 

      coverage of

 

      family planning

 

      servicesa

 

 

      Optional                      No                      No

 

      coverage of

 

      tuberculosis-

 

      related servicesb

 

 

      Coverage of                   No                      No

 

      pregnancy-

 

      related servicesc

 

 

      Coverage limited              No                      No

 

      to treatment of

 

      emergency

 

      medical

 

      conditionsd

 

 

      Coverage            According to a proposed           No

 

      authorized under    rule issued by the

 

      § 1115(a)(2) of     Internal Revenue Service

 

      the Social          (IRS), this coverage is

 

      Security Act        not considered minimum

 

      (SSA)e              essential coveragef

 

 

      Medicaid            According to a proposed           No

 

      coverage for the    rule issued by the IRS,

 

      medically           this coverage is not

 

      needyg              considered minimum

 

                          essential coveragef

 

 

 State Children's                   Yes                     No

 

 Health Insurance

 

 Program (CHIP)

 

 

 TRICARE

 

 

      Limited benefit     According to a proposed           No

 

      TRICARE             rule issued by the IRS,

 

      programsh           this coverage is not

 

                          considered minimum

 

                          essential coveragef

 

 

      Other coverage                Yes                     No

 

      offered under

 

      TRICARE

 

 

 VA Health Care

 

 Programsi

 

 

      Medical benefits              Yes                     No

 

      package

 

      authorized for

 

      eligible

 

      veterans under

 

      38 U.S.C. 1710

 

      and 38 U.S.C.

 

      1705

 

 

      Civilian Health               Yes                     No

 

      and Medical

 

      Program of the

 

      Department of

 

      Veterans Affairs

 

      (CHAMPVA)

 

      authorized under

 

      38 U.S.C. 1781j

 

 

      Comprehensive                 Yes                     No

 

      health care

 

      program

 

      authorized under

 

      38 U.S.C. 1803

 

      and 38 U.S.C.

 

      1821 for certain

 

      children of

 

      Vietnam Veterans

 

      and Veterans of

 

      covered service

 

      in Korea who are

 

      suffering spina

 

      bifida

 

 

 Peace Corps Program                Yes                     No

 

 

 Nonappropriated Fund               Yes                     No

 

 Health Benefits

 

 Program of the

 

 Department of Defense

 

 

 Employer-sponsored                 Yes                     No

 

 health insurance

 

 

 Individual market                  Yes                     No

 

 health insurance

 

 

 Qualified health                   Yes                     No

 

 plans (QHP) offered

 

 inside and outside

 

 exchanges

 

 

 Grandfathered health               Yes                     No

 

 plansk

 

 

 Self-funded student                Yes                     No

 

 health plansl

 

 

 Refugee Medical                    Yes                     No

 

 Assistance supported

 

 by the Administration

 

 for Children and

 

 Families

 

 

 State high risk                    Yes                     No

 

 poolsm

 

 

 Group health plan                  Yesn                    No

 

 provided through

 

 insurance regulated

 

 by a foreign

 

 government

 

 _____________________________________________________________________

 

 

 Source: CRS analysis of ACA statute, 26 CFR Part 1, and its

 

 implementing regulations and guidance.

 

 

 Notes: ACA allows the Secretary of HHS, in coordination with

 

 the Secretary of the Treasury, to recognize arrangements other than

 

 those identified in statute as minimum essential coverage. HHS has

 

 outlined a procedure by which a sponsor of coverage or a government

 

 agency may apply to HHS to have its coverage certified as minimum

 

 essential coverage. The process is outlined in 45 CFR § 156.604

 

 and in guidance issued by HHS, CCIIO Sub-Regulatory Guidance:

 

 Process for Obtaining Recognition as Minimum Essential Coverage,

 

 on October 31, 2013.

 

 

                             FOOTNOTES TO TABLE A-1

 

 

      a As defined in 42 U.S.C. 1396a(a)(10)(A)(ii)(XXI).

 

 

      b As defined in 42 U.S.C. 1396a(a)(10)(A)(ii)(XII).

 

 

      c As defined in 42 U.S.C. 1396a(a)(10)(A)(i)(V) and

 

 1396a(a)(10)(A)(ii)(IX).

 

 

      d As authorized by 42 U.S.C. 1396b(v).

 

 

      e In general, § 1115 of the Social Security Act

 

 (SSA) gives the Secretary of HHS authority to approve experimental,

 

 pilot, or demonstration projects that promote the objectives of the

 

 Medicaid and CHIP programs. Section 1115(a)(2) of the SSA allows a

 

 state to extend benefits to additional populations (expansion

 

 populations) that would not otherwise be eligible for Medicaid. The

 

 coverage a state extends to expansion populations is not required to

 

 be comprehensive and may be limited.

 

 

      f While generally not considered minimum essential

 

 coverage, to the extent such coverage is comprehensive coverage, the

 

 Secretaries of HHS and the Treasury may recognize such coverage as

 

 minimum essential coverage. See the proposed rule for more details

 

 (78 Federal Register 4302, January 27, 2014).

 

 

      g As defined in 42 U.S.C. 1396a(a)(10)(C) and 42 CFR

 

 435.300 and following (Subpart D).

 

 

      h Specifically, the program providing care limited to

 

 the space available in a facility for the uniformed services for

 

 individuals excluded from TRICARE coverage under sections 1079(a),

 

 1086(c)(1), or 1086(d)(1) of Title 10, U.S.C., and the program for

 

 individuals not on active duty for an injury, illness, or disease,

 

 incurred or aggravated in the line of duty under sections 1074a and

 

 1074b of Title 10, U.S.C.

 

 

      i P.L. 111-173 amended ACA to clarify that the

 

 Secretary of Veterans Affairs, in coordination with the Secretary of

 

 HHS and the Secretary of the Treasury, would determine which VA

 

 health care programs would be considered minimum essential coverage.

 

 The programs outlined in the table are the VA programs the

 

 Secretaries have identified as minimum essential coverage; it would

 

 seem that coverage under any VA programs other than those specified

 

 in the table is not considered minimum essential coverage. For more

 

 information on VA health care under ACA, see CRS Report R41198,

 

 TRICARE and VA Health Care: Impact of the Patient Protection and

 

 Affordable Care Act (ACA), by Sidath Viranga Panangala and Don J.

 

 Jansen.

 

 

      j For more information on the Civilian Health and

 

 Medical Program of the Department of Veterans Affairs (CHAMPVA), see

 

 CRS Report RS22483, Health Care for Dependents and Survivors of

 

 Veterans, by Sidath Viranga Panangala.

 

 

      k Grandfathered plans are defined as those individual

 

 and group plans that an individual or family was enrolled in on the

 

 date of enactment (March 23, 2010). For additional information about

 

 grandfathered plans, see CRS Report R41166, Grandfathered Health

 

 Plans Under the Patient Protection and Affordable Care Act (ACA),

 

 by Bernadette Fernandez.

 

 

      l Self-funded student health plans are designated

 

 minimum essential coverage for plan or policy years beginning on or

 

 before December 31, 2014; for coverage beginning after December 31,

 

 2014, sponsors of such plans have to apply to the Secretary of HHS to

 

 be recognized as minimum essential coverage via the process outlined

 

 in 45 CFR § 156.604.

 

 

      m State high risk pools are designated as minimum

 

 essential coverage for plan or policy years beginning on or before

 

 December 31, 2014; for coverage beginning after December 31, 2014,

 

 sponsors of high risk pool coverage have to apply to the Secretary of

 

 HHS to be recognized as minimum essential coverage via the process

 

 outlined in 45 CFR § 156.604.

 

 

      n According to guidance from HHS, an individual who has

 

 coverage under a group health plan provided through insurance

 

 regulated by a foreign government has minimum essential coverage if

 

 the individual is "physically absent from the United States . . ."

 

 and if the individual is "physically present in the United States . .

 

 . while the individual is on expatriate status." For more information

 

 see CCIIO Sub-Regulatory Guidance: Process for Obtaining

 

 Recognition as Minimum Essential Coverage, issued October 31,

 

 2013.

 

END OF FOOTNOTES TO TABLE A-1

 

 

Author Contact Information

 

Annie L. Mach

 

Analyst in Health Care Financing

 

amach@crs.loc.gov, 7-7825

 

Acknowledgments

 

Janemarie Mulvey, former CRS Specialist in Health Care Financing, and Manon Scales, former CRS Research Associate, contributed to previous versions of this report.
FOOTNOTES

 

 

1 On June 28, 2012, the United States Supreme Court issued its decision in National Federation of Independent Business v. Sebelius, finding that the individual mandate in Section 5000A of the Internal Revenue Code (as added by§ 1501 of ACA), is a constitutional exercise of Congress's authority to levy taxes. However, the Court held that it was not a valid exercise of Congress's power under the Commerce Clause or the Necessary and Proper Clause. For more information, see CRS Report WSLG112, Supreme Court Upholds the Individual Mandate as a Permissible Exercise of Congress' Taxing Power, by Erika K. Lunder.

2 § 1501(b) as amended by § 10106 (b) of P.L. 111-148 and by § 1002 of P.L. 111-152 adds Chapter 49, Maintenance of Essential Coverage, to Subtitle D of the Internal Revenue Code of 1986.

3 In the final rule on maintaining minimum essential coverage (78 FR 53646, August 30, 2013), IRS provides that a taxpayer is liable for an individual mandate penalty for his/her dependents regardless of whether the taxpayer claims the dependents for the taxable year. For the purposes of this provision, "dependent" is defined in § 152 of the Internal Revenue Code (IRC) and includes qualifying children and qualifying relatives.

4 Household income is defined as the modified adjusted gross income (MAGI) of the taxpayer, plus the aggregate MAGI of all other individuals for whom the taxpayer is allowed a deduction for personal exemptions for the taxable year. Modified adjusted gross income is defined as adjusted gross income increased by foreign earned income (§ 911 of the IRC) and any amount of tax-exempt interest received or accrued by the taxpayer during the taxable year.

5 IRS has not released the filing threshold for tax year 2014; the filing threshold for tax year 2013 is the most recent available. In 2013, the standard deduction was $6,100 and the personal exemption was $3,900, so that generally, the filing thresholds for individuals under age 65 were $10,000 for a single filing status and $20,000 for a married couple filing jointly. The filing threshold is linked to an inflation adjustment based on the CPI-U, and therefore it may be higher in 2014 and subsequent years.

6 The inflation adjustment will be based on the cost-of-living adjustment (CPI-U), for the calendar year, with any increase that is not a multiple of $50 rounded to the next lowest multiple of $50.

7 As of the date of this report, no information has been released as to the national average premiums of bronze-level plans offered through exchanges.

8 The Consumer Price Index for all Urban Consumers (CPI-U) is a measure of inflation published by the U.S. Bureau of Labor Statistics. One way in which it is used is to calculate annual inflation adjustments to personal income tax brackets.

9 Required contribution is defined as (1) in the case of an individual eligible to purchase minimum essential coverage through an employer (other than through the exchange), the portion of the annual premium that is paid by the individual for self-only coverage, or (2) for individuals not included above, the annual premium for the lowest cost bronze plan available in the individual market through the exchange in the state in which the individual resides, reduced by the amount of the premium credit for the taxable year.

10 Household income is defined as the modified adjusted gross income (MAGI) of the taxpayer, plus the aggregate MAGI of all other individuals for whom the taxpayer is allowed a deduction for personal exemptions for the taxable year. Modified adjusted gross income is defined as adjusted gross income increased by foreign earned income (Section 911 of the IRC) and any amount of tax-exempt interest received or accrued by the taxpayer during the taxable year.

11 In order to qualify for the religious exemption, an individual must be a member of a recognized religious sect or division (as described in 1402(g)(1) of the Internal Revenue Code of 1986) by reason of which he or she is conscientiously opposed to acceptance of the benefits of any private or public insurance that makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act, such as Social Security benefits and Medicare). Such sect or division must have been in existence at all times since December 31, 1950. There is no list of specific religious groups that qualify for the exemption. For more information, see CRS Report RL34708, Religious Exemptions for Mandatory Health Care Programs: A Legal Analysis, by Cynthia Brougher.

12 A health care sharing ministry is defined as an organization described in Section 501(c) of the IRC (including corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, or testing for public safety) and is exempt from taxation under Section 501(a). Members of the ministry share a common set of ethical or religious beliefs and share medical expenses, and retain membership even after they develop a medical condition. The health sharing ministry must have been in existence (and sharing medical expenses) at all time since December 31, 1999, and must conduct an annual audit by an independent certified public accountant, available to the public upon request.

13 This exemption only applies to the first short coverage gap in a calendar year.

14 The term "Indian tribe" means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), that is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.

15 IRS Notice 2013-42.

16 IRS Notice 2014-10.

17 45 CFR § 155.605(g) and the guidance noted.

18 HHS provides further guidance on these circumstances in "Guidance on Hardship Exemption Criteria and Special Enrollment Periods" published June 26, 2013, available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/exemptions-guidance-6-26-2013.pdf.

19 This circumstance is not described in regulations; it is described in "Shared Responsibility Provision Question and Answer" published October 28, 2013, available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/enrollment-period-faq-10-28-2013.pdf.

20 This circumstance is not described in regulations; it is described in "Options Available for Consumers with Cancelled Policies" published December 19, 2013, available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/cancellation-consumer-options-12-19-2013.pdf.

21 For more information about catastrophic plans, see CRS Report R43233, Private Health Plans Under the ACA: In Brief, by Bernadette Fernandez and Annie L. Mach.

22 Several different types of hardship exemptions are described in regulations and guidance (see the text box in this report); at least three of the types will be provided exclusively through the tax filing process, not through exchanges.

23 According to regulations (45 CFR § 155.610(h)), exchanges may only certify exemptions for applications made within the calendar year for which the exemption is being sought. Individuals seeking to claim exemptions after December 31st of the relevant year must do so on their federal tax return.

24 Originally, the assumption was that all states would implement the ACA Medicaid expansion in 2014 as required in statute because implementing the ACA Medicaid expansion was required in order for states to receive any federal Medicaid funding. However, on June 28, 2012, the United States Supreme Court issued its decision in National Federation of Independent Business v. Sebelius, finding that the federal government cannot terminate the federal Medicaid funding states are receiving for their current Medicaid program if a state refuses to implement the ACA Medicaid expansion. This decision effectively made the ACA Medicaid expansion optional for states.

25 For more information on premium credits and cost-sharing subsidies see, CRS Report R41137, Health Insurance Premium Credits in the Patient Protection and Affordable Care Act (ACA), by Bernadette Fernandez.

26 § 1502 of P.L. 111-148, which creates § 6055 of the Internal Revenue Code of 1986.

27 IRS Notice 2013-45.

 

END OF FOOTNOTES
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