The individual mandate is also referred to as the individual shared responsibility provision. The Affordable Care Act (ACA) established the rule in 2014 that all individuals must obtain acceptable health insurance for themselves and their family members, regardless of age, or pay a penalty for any month during which they were uninsured. They would have needed to maintain minimum essential coverage (MEC) through either an employer, the individual market, a government- funded program, or any other coverage designated by the U.S. Department of Health & Human Services, or pay a penalty.
How Does the Individual Mandate Affect You?
The individual mandate was created to encourage healthy people, who generally wouldn’t consider buying health insurance, to sign up. The ones who need medical care the most are sick people, but because of the care they require being so costly, premiums have risen and don’t attract those who are healthy.
Economists thought that requiring more people to sign up would keep premiums low for everyone.
The penalty amount has risen since the individual mandate came into effect, from $95 per person or 1 percent of income – whichever was the greater amount – to $695 or up to 2.5 percent of income in 2016 and after, with a cap at three times the annual flat dollar amount. In a lot of cases, paying the penalty became cheaper than paying for the premium of a health plan, but the overall goal was for the government, insurers, employers and individuals to have shared responsibility to improve the availability and use of insurance coverage in the United States.
The only way to be exempt was if you were to experience any circumstance of hardship that would prevent you from getting health insurance for any one day of a month; it would be treated as exempt for the entire month and you will need to file an exemption claim.
The Tax Reform Bill
There have been challenges to the law, suggesting that it’s unconstitutional for the government to penalize its citizens for not consuming a product, but supporters insist that the government is taxing those without health insurance and has the right to do so.
Starting in 2019, individuals will no longer be penalized for being medically uninsured. President Donald Trump signed a tax reform bill, passed by Congress in 2017 called the Tax Cuts and Jobs Act, that eliminated the individual mandate penalty, completely reducing the fee to zero.
However, you may be still be required to pay the penalty in early 2019, depending on your noncompliance for the 2017 and 2018 tax year and you will be responsible for 100 percent of your health care costs if you aren’t covered by insurance and will still need to comply with all other ACA provisions.
What does Eliminating the Individual Mandate Penalty Mean for You?
The individual mandate is still active, but the penalty you must pay for having no insurance has been reduced to zero. It only makes sense that without the mandate penalty to have coverage, among many other factors that may affect the consumer’s decision, healthy people will drop out of the market. So, the question healthy people are faced with is, why pay for care that you more than likely won’t need?
Why Maintaining Health Insurance is Important
Having insurance and medical care available to you is always a good idea, in the case that you are ill – it’s protection in the event that something happens.
Believe it or not, people without insurance pay twice as much for care and can easily fall into debt after a serious accident or sickness. A common urgent care center visit averages about $150 per visit and the average emergency room visit can run up to a thousand dollars, depending on treatment you receive. A hospital stay, alone, can cost about $4,000 a day. That doesn’t include any additional services or procedures you may receive, such as doctor’s fees, medications, and treatments.
Even when you aren’t sick or hurt, you will need medical care at some point. Prevention can save you so much in the long run, for your health and financially. Most medical plans offer free preventive care or you pay less for in-network health care. The routine doctor visits make spotting a serious condition easier and quicker to treat. Waiting until you experience severe symptoms to see a doctor may be too late and can be extremely costly, when it may very well be something that could have been prevented.
What can Come of Consumer Transitions Due to the Reform
According to the non-partisan Congressional Budget Office, it’s predicted that the number of uninsured will rise by the millions and continue to grow every year. Health insurance rates would rise for everyone in order to cover the cost of care required for the sick, as happened prior to the establishment of the individual mandate. Instead of paying for increased premiums and having plans with more options and provider networks, healthy consumers are buying cheaper plans, with less benefits and protections, that aren’t ACA-compliant.
To learn more about the individual health insurance market, contact a Primary Care Insurance Solutions Agent.
Frequently Asked Questions
What is the individual mandate in relation to the Affordable Care Act (ACA)?
The individual mandate is a provision of the ACA that requires individuals to have acceptable health insurance coverage for themselves and their family members or face a penalty.
Why was the individual mandate established?
The individual mandate was created to encourage healthy individuals to obtain health insurance coverage, thereby balancing the risk pool and keeping premiums lower for everyone.
What was the main goal of the individual mandate?
The goal was to promote shared responsibility among the government, insurers, employers, and individuals, ultimately improving the availability and use of insurance coverage in the United States.
What circumstances could exempt individuals from the individual mandate penalty?
Individuals could be exempt if they experienced hardship preventing them from obtaining health insurance for any one day of a month. They would need to file an exemption claim.
How did the Tax Cuts and Jobs Act impact the individual mandate penalty?
The Tax Cuts and Jobs Act signed by President Trump in 2017 eliminated the individual mandate penalty, reducing it to zero starting in 2019.
What is the consequence of eliminating the individual mandate penalty?
While the individual mandate is still active, the penalty for not having insurance has been reduced to zero. Healthy individuals might choose to drop out of the market without the mandate penalty.
Why is maintaining health insurance important even after the penalty has been eliminated?
Having insurance provides protection in case of illness or accidents, preventing high medical costs. Regular preventive care also helps identify and treat conditions early.
What potential impact did the elimination of the individual mandate penalty have on the consumer market?
Predictions suggest the number of uninsured individuals could increase, leading to higher insurance rates for everyone to cover the costs of care for the sick. Healthy consumers might opt for cheaper plans with fewer benefits.
How can individuals learn more about the individual health insurance market?
To learn more about the individual health insurance market, individuals can contact a Primary Care Insurance Solutions Agent.