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Individual Shared Responsibility Payment Repealed Beginning in 2019

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (“TCJA”) overhauling the current tax code with the most significant changes since 1986. One of the provisions of the TCJA was the repeal of the individual shared responsibility payment related to the individual shared responsibility, more commonly known as the individual mandate, under the Affordable Care Act (“ACA”). It is important to note that this repeal will not take effect until January 1, 2019. Accordingly, taxpayers are currently required to be in compliance with the individual mandate provision or be subject to the individual shared responsibility payment.

Currently, under ACA, taxpayers are still obligated to obtain minimum essential health insurance coverage for themselves and their dependents, qualify for a health coverage exemption or make a shared responsibility payment with their federal income tax return for the months without coverage or exemption through December 31, 2018. Beginning in 2019, there will be no individual shared responsibility payment due if an individual fails to maintain minimum essential coverage.

Minimal Essential Health Insurance Coverage

Minimal essential coverage under the individual mandate includes the following:

  • Most employer-provided health coverage;
  • Insurance purchased through a Health Insurance Marketplace;
  • Coverage under an eligible government-sponsored program such as Medicare and most Medicaid;
  • Health insurance purchased from an insurance company; and
  • Certain other coverage recognized as minimum essential coverage by the Department of Health & Human Services.

Exemptions

An exemption from the individual mandate may apply if one of the following conditions is met:

  • The lowest-cost coverage available is considered unaffordable;
  • The gap in coverage is less than three consecutive months;
  • Citizens living abroad and certain noncitizens;
  • Hardship preventing the taxpayer from obtaining coverage (homelessness, bankruptcy);
  • Incarceration; or
  • Belonging to a group specifically exempt.

Individual Shared Responsibility Payment

Individuals who fail to maintain minimal essential health insurance coverage are subject to the individual shared responsibility payment. This payment for the years 2017 and 2018 is equal to the greater of 2.5 percent of a taxpayer’s household income in excess of certain filing thresholds (based on filing status, age and gross income amounts) or a flat dollar amount. The flat dollar amounts are $695 per adult and $347.50 per child (under the age of 18) with a family maximum of $2,085. The penalty is pro-rated based on the number of months that the family was uninsured for the year.

Conclusion

The TCJA did not eliminate the individual mandate, it repealed the individual shared responsibility payment beginning January 1, 2019. Other ACA provisions, such as the state health insurance marketplaces and the employer shared responsibility mandate, which requires businesses with more than 50 full-time employees to offer certain health coverage to their full-time employees, will still be in effect.

Author: Eric Cooper | ecooper@withum.com


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