The March 31 Deadline for the Individual Health Insurance Mandate Is Fast Approaching

By Drew Cheney March 10, 2014

Starting in 2014, the Patient Protection and Affordable Care Act imposes a penalty (also known as an “individual shared responsibility payment”) on almost all individuals and families who lack health coverage that meets certain minimum requirements. The deadline has been extended a couple of times, but it now appears that March 31, 2014 is the final deadline for having coverage in place.  The penalty for noncompliance will be assessed on the 2014 income tax return and is the greater of:

• 1% of income, capped at the average national cost of bronze level coverage on the Health Insurance Marketplace; or
• $95 per adult and $47.50 per child, up to a maximum of $285 per family.

There is a widespread misconception that the penalty is $95 per person, but in many cases it will be far more than that, with some taxpayers potentially owing thousands of dollars.  The Tax Policy Center, which is a joint venture of the Urban Institute and Brookings Institution, recently has come up with a helpful calculator for estimating the amount of the penalty.

The primary types of coverage that meet the requirement are Medicare, Medicaid, most employer-sponsored coverage, and coverage purchased through the Health Insurance Marketplace of at least the bronze level.  To purchase coverage through the exchange click here.

In order to be effective as of the beginning of the next month, coverage must be purchased by the 15th day of the previous month.  Thus, to obtain coverage by April 1, one needs to enroll by March 15, and people who purchase coverage between March 16 and March 31 will not have their coverage take effect until May 1.  Nonetheless, www.healthcare.gov clearly states that “if you enroll by March 31, 2014, you won’t have to pay the penalty for any month of 2014.”

Although the deadline is March 31, it would be wise to try to obtain coverage sooner rather than waiting until close to the deadline.  Enrollment involves numerous decisions, plus it is far from certain that the website will be able to adequately handle the inevitable last-minute rush. People who fail to enroll on time will be unable to obtain coverage until 2015 unless one of certain types of life events takes place.

For 2015, the penalty amounts will at least double.  Also, the deadline for obtaining coverage will likely be much tighter.  The currently-proposed open enrollment period for 2014 is from November 15, 2104 through January 15, 2015.

If you have any questions regarding how these rules impact you, please contact Drew Cheney or your regular BNN tax advisor.