FACT SHEET: INDIVIDUAL SHARED RESPONSIBILITY FOR HEALTH INSURANCE COVERAGE AND MINIMUM ESSENTIAL COVERAGE PROPOSED RULES
Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have basic health insurance coverage (known as minimum essential coverage), qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return. Individuals will not have to make a payment if coverage is unaffordable, if they spend less than three consecutive months without coverage, or if they qualify for an exemption for several other reasons, including hardship and religious beliefs.
Today, the Treasury Department and Internal Revenue Service (IRS), as well as the Centers for Medicare & Medicaid Services at the Department of Health and Human Services (HHS), issued two sets of proposed regulations. The regulations explain the shared responsibility provision and lay out the eligibility rules for receiving an exemption and the process by which individuals can receive certificates of exemption. Both agencies’ proposed regulations include rules that will ease implementation and help to ensure that the payment applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage.
According to the Congressional Budget Office, less than two percent of Americans will owe a shared responsibility payment.
Highlights of the Proposed Regulations
A principle in implementing the individual shared responsibility provision is that the shared responsibility payment should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time. The proposed regulations include several rules to implement this principle. For example:
The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.
Additional Details about the Proposed Regulations
The proposed regulations explain that minimum essential coverage includes, at a minimum, all of the following statutory categories:
Minimum essential coverage does not include certain specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition. Under the law, minimum essential coverage also includes any additional types of coverage that are designated by the Department of Health and Human Services (HHS) or, as detailed by the proposed regulation, when the sponsor of the coverage follows a process outlined in the regulations to be recognized as minimum essential coverage.
Specific Rules and Process for Receiving an Exemption
The proposed regulations also codify the statute’s nine categories of individuals who are exempt from the shared responsibility payment. These categories are as follows:
The statute specifies that the religious conscience exemption and the hardship exemption are available exclusively through a Health Insurance Marketplace or Exchange. Four categories of exemptions are proposed to be available exclusively from the IRS through the filing process – the exemptions for individuals who are not lawfully present, taxpayers with household income below the filing threshold, individuals who cannot afford coverage, and individuals who experience short coverage gaps. The rule provides a choice to individuals for the exemptions in the three remaining categories – members of a health care sharing ministry, individuals who are incarcerated, and members of Indian tribes. Such exemptions could be provided either through a Heath Insurance Marketplace or through the tax filing process.
Starting in 2015, individuals filing a tax return for the previous tax year will indicate which members of their family (including themselves) are exempt from the provision. For family members who are not exempt, the taxpayer will indicate whether they had insurance coverage. For each non-exempt family member who doesn’t have coverage, the taxpayer will owe a payment.
HHS and IRS are seeking comments on these proposals. Comments on the Treasury proposed regulations are due by May 2, 2013, and a public hearing will be held May 29, 2013. Comments on the HHS proposed regulations are due by March 18, 2013.
To read the HHS rule, visit: http://ofr.gov/OFRUpload/OFRData/2013-02139_PI.pdf.
To read the IRS rule, visit: http://ofr.gov/OFRUpload/OFRData/2013-02141_PI.pdf.
For questions and answers on the Individual Shared Responsibility Provision, visit IRS.gov
For more information about health insurance through the Health Insurance Marketplace, including how to sign up for email updates and tips on how to prepare for open enrollment in October 2013, visit: http://www.healthcare.gov/marketplace/index.html.