So what is really going to happen if I don’t have health insurance?
Effective January 1, 2014, the choice for most people will be to either purchase health insurance or pay a penalty. The IRS recently clarified what the individual mandate means for an individual taxpayer.
Under the new rules, if you choose to not carry health insurance, you will be subject to a penalty of $95 per person each year, or 1% of household income, whichever is greater. However, over time, the penalty increases so that by 2016 it is $695 per person, or 2.5% of household income. The IRS will assess and collect this penalty the same way as other taxes. That is, unless you qualify for one of several exceptions. A few of the exceptions are:
- Those who lack insurance while temporarily unemployed;
- Individuals whose health care is supplied by a temporary staffing agency;
- Those who are opposed to having insurance coverage for religious reasons;
- People with income below the threshold that is required to file an income tax return; and
- Individuals who qualify for Medicaid, but live in a state that has opted out of the new expanded program, such as Texas, Pennsylvania, or Wisconsin.
The final regulations also include information on what constitutes the required minimum essential coverage and describe how individuals are responsible for spouses, children, and other dependents.
Whether you agree with the controversial individual mandate or not, the penalty is real and implementation is fast approaching.
A full version of the IRS final regulations is available online.