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Individual insurance requirement kicks in January 2014

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individual mandate

The individual mandate, which went into effect in January 2014, is an important part of the Affordable Care Act. It requires people who live in the U.S. legally to buy a minimum amount of health insurance coverage, unless they qualify for an individual exemption.

When you file your taxes, you'll need to show that you have some type of health care coverage or can qualify for a credit. It could be an employer's plan, a marketplace plan, a Medicare or Medicaid plan. You can also buy coverage directly from an insurer through the traditional market. If you don't have coverage, you'll pay a tax penalty that will get bigger over time.

See how the individual mandate works and how you can get coverage

Why does the law require health coverage?

The individual mandate helps to keep the cost of coverage affordable for everyone. Remember that the law says you can't be turned down for health insurance just because you have health problems. Without the individual mandate, healthy people wouldn't have to get insured. So health plans would be left to cover mostly people who need more health care. That means a higher cost of care for a smaller group of people. The result: Premiums would be much too high. The individual mandate aims to have more people covered and more people contributing, whether sick or healthy, and keep premiums under control.

What happens if I can't afford to buy health coverage?

You might qualify for the government's free or low-cost health programs. Medicare is for people 65 or older. Medicaid helps people with low-income. State Children's Health Insurance Program helps children from low-income families.

You'd qualify for a credit or subsidy when buying from the health insurance marketplace if:

  • You're an individual making $11,670 and $46,680 a year or a family of four making $23,850 and $95,400 in 2014, and
  • You don't get coverage at work or have access to affordable coverage (meaning your plan costs more than 9.5% of your income).

Read more about tax credits in the health insurance marketplace

Also, if your income is so low that you don't have to file taxes, then you're exempt from the individual mandate. If you file taxes, you still might qualify for tax credits that can help you get health coverage.

How will the government know if I don't have health insurance?

When you file your income tax, you'll fill out an IRS form about your health insurance coverage.

How much is the penalty if I don't have insurance and how do I pay?

The tax penalty for not having a minimum amount of coverage is about $95 per person or 1% of taxable income in 2014. This penalty will increase each year. For 2015, it is $325 per person or 2% of taxable income. Since it's a tax penalty, you send it to the IRS.

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