The individual mandate is a provision within the Affordable Care Act that required individuals to purchase minimum essential coverage – or face a tax penalty – unless they were eligible for an exemption.
Most Americans already get health insurance either from an employer or from the government (Medicaid, Medicare, VA), so they didn’t need to worry about the penalty (because employer-sponsored and government-sponsored health insurance count as minimum essential coverage).
The IRS reported that for tax filers subject to the penalty in 2014, the average penalty amount was around $210. In 2015, the average penalty was around $470. On 2016 tax returns, the average was about $667 per filer who owed a penalty.
For 2018, the penalty for a middle-income family of four earning $60,000 was $2,085.
The penalty could never exceed the national average cost for a Bronze plan, though – as penalty caps were readjusted annually to reflect changes in the average cost of a Bronze plan.
Technically, the individual mandate itself is still in effect, but there’s no longer a penalty to enforce it. The tax penalty was eliminated after the end of 2018, under the terms of the Tax Cuts and Jobs Act of 2017.
The continued existence of the mandate – but without the penalty – is the crux of the California v. Texas (aka Texas v. Azar) lawsuit, in which 20 states challenged the constitutionality of the mandate without the penalty, arguing that the entire ACA should be overturned if the mandate is unconstitutional.
That case ultimately was argued before the Supreme Court in late 2020, but a ruling is not expected until June 2021.
When the Affordable Care Act was written, lawmakers knew that it would be essential to get healthy people enrolled in coverage, since insurance only works if there are enough low-cost enrollees to balance out the sicker, higher-cost enrollees. So the law included an individual mandate, otherwise known as the shared responsibility provision.
Yes. Although the federal individual mandate penalty was eliminated at the end of 2018, some states have implemented their own individual mandates and associated penalties.
Mandates are in effect in Massachusetts, New Jersey, the District of Columbia, California and Rhode Island.
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