Starting in January 2014, most people will be required to have health insurance coverage or pay a penalty if they do not. Coverage may include employer-provided insurance, coverage an individual purchases on their own, Medicaid, Child Health Plan Plus (CHP+), Medicare or TRICARE.
The requirement applies to individuals of all ages, including children. An adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.
Exemptions from the Individual Responsibility Payment
Though most people will be required to have insurance, several groups are exempt from the requirement to obtain coverage or pay the penalty, including but not limited to:
- people who are uninsured for less than 3 months of the year
- people who would have to pay more than 8% of their income for health insurance
- people with incomes below the threshold required for filing taxes. (Not sure if you are required to file taxes? Click here to learn more.)
- members of a federally recognized tribe or eligible for services through an Indian Health Services provider
- members of a recognized health care sharing ministry
- members of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
- people who are incarcerated, and not awaiting the disposition of charges
- people who not lawfully present in the U.S.
- people who qualify for a “hardship exemption”
Coloradans who want to apply for an exemption should submit the appropriate form to the federal government to receive an exemption code. Then Coloradans will need to provide the exemption code into the Connect for Health Colorado website to gain access to catastrophic health plan options.
Click here to get more information about how to apply for an exemption to the individual mandate in Colorado.
The Penalty for 2014 and Beyond
The penalty for people who forego insurance is the greater of two amounts: 1) a specified percentage of income or 2) a specified dollar amount.
- The percentages of income are phased in over time at 1% in 2014, 2% in 2015, and 2.5% starting in 2016.
- The dollar amounts are also phased in at $95 in 2014, $325 in 2015, and $695 beginning in 2016 (with annual increases after that). In 2014 the fee for uninsured children is $47.50 per child. The most a family would have to pay in 2014 is $285.
The penalty is also capped at an amount equal to the national average premium for the lowest cost bronze health plan available through the Marketplace.
If you’re uninsured for just part of the year, the penalty will be pro-rated, meaning 1/12 of the yearly penalty applies to each month you’re uninsured. If you’re uninsured for less than 3 months, you will not have to pay a penalty.
Enroll by March 31, 2014
If you enroll in a health insurance plan through the Connect for Health Colorado marketplace by March 31, 2014, you won’t have to make the payment for any month before your coverage begins.
For example, if you enroll in a Connect for Health Colorado marketplace plan on March 31, 2014, your coverage will begin on May 1, 2014. If you didn’t have coverage before May 1, 2014, you won’t have to pay a penalty for any of the previous months of 2014.
Proof of Coverage Provided by Your Health Plan
Health insurance plans will provide documentation to clients to prove they have the minimum coverage required by law. When you file your 2014 tax return you will have to enter information about your coverage status, or if you were eligible for an exemption, on your tax return. Insurers will provide a notice to you by January 31, 2015 that describes your coverage status during the previous year.
The federal government will be overseeing the enforcement of the mandate. Please contact the Internal Revenue Service (IRS) for more information.