What is the Individual Mandate for Health Insurance?

The individual mandate is officially known as the individual shared responsibility provision. Under this provision, all United States citizens and legal residents are mandated to have health insurance. 

The individual mandate is a part of the Affordable Care Act. From 2014 to 2018, it carried a financial penalty, which the IRS assessed for those who did not comply with the mandate. No federal penalty exists in 2022, although some states may impose a penalty on residents without healthcare.  

Learn more about the individual mandate and what it may mean for you with Benzinga’s guide.

What is the Individual Mandate?

The individual mandate provision of the federal health law requires you, your family, children or anyone else that you claim as a dependent on your taxes to have health insurance. This coverage can be supplied through your employer, public programs like Medicare or Medicaid or an individual policy that you purchase. 

Who is Affected by the Individual Mandate?

When the Affordable Care Act was implemented, lawmakers knew that it would be important to enroll healthy people because the core tenet of healthcare insurance is only effective with enough low-cost healthy enrollees to balance out sick, higher-cost enrollees. The law was set in place to include an individual mandate to carry healthcare insurance, called the shared responsibility provision. Initially, it carried an enforcement penalty that was eliminated after 2018 under the Tax Cuts and Jobs Act of 2017.

The individual mandate was designed to include an estimated 57 million individuals younger than 65 years old who did not have health insurance. The Congressional Budget Office estimated that by the year 2014, nearly three out of five Americans would have protection through their employer-provided plan. 

Although the mandate is not penalized federally, Massachusetts, New Jersey, the District of Columbia, California and Rhode Island enforce it with state legislation that imposes penalties for their residents.

Your Health Insurance Options Under the Individual Mandate

You have several different options available under the individual mandate. Here are the general categories.

Medicare

This insurance option is a federally funded health insurance program initially designed for individuals 65 years of age and older. Over the years, Medicare expanded to include disabled people who could be under 65 years old. 

The program is divided into four different parts, A, B, C and D. Those who qualify for Medicare satisfy the following requirements:

• United States citizen or qualified legal resident
• Either 65 years of age or older, younger than 65 with a qualifying disability or any age with a diagnosis of End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS)
• To be considered a legal United States resident, you must have lived in the United States for a minimum of 5 consecutive years before applying for Medicare

Medicare enrollment may or may not be automatic; it depends on your circumstances. Individuals are automatically enrolled if they already receive Social Security or Railroad Retirement Board benefits. 

Otherwise, you need to register yourself manually during your Initial Enrollment Period if none of the above apply to you. Enrolling in Medicare can be done on the Social Security website or by contacting your local Social Security office.

U.S. Department of Veterans Affairs

By law, the U.S. Department of Veterans Affairs (VA) is required to bill private health insurance providers for medical care, supplies and prescriptions provided for treatment of veteran’s conditions not connected to their service. 

All veterans that apply for VA medical care provide information on their healthcare coverage, which includes protection offered under policies of a spouse. Payments received by the VA may be used to offset a veteran’s copay responsibility.

Medicaid

Medicaid is the country’s public insurance program through which low-income families and qualifying individuals receive health protection. Although the program is subject to federal government rules, each state can administer its own Medicaid program. States also can determine health care delivery models, covered populations and covered services.

This federal health insurance program covers one in five Americans. It offers low-cost or free health coverage to low-income families and individuals, including qualified children, pregnant women and anyone currently receiving Supplemental Security Income. In some states, Medicaid protects all low-income adults below a certain income threshold.

Employer-provided insurance

Employer-sponsored health plans are health insurance that is offered to employees and their dependents as a benefit of employment. Employer-sponsored health plans currently provide some level of health coverage for approximately 160 million Americans — nearly half the total population of the country. Health insurance benefits are more likely to be provided by larger companies; an estimated 99 percent of companies with 200 or more workers offer health benefits. This type of healthcare insurance can be combined with workers compensation to enhance further and protect organizations from high costs related to workplace injuries, illnesses and deaths.

The Health Insurance Marketplace

The Health Insurance Marketplace, considered a health insurance exchange, lets consumers in the United States purchase private individual and family health insurance plans. 

Individuals can also receive income-based subsidies to make healthcare insurance more affordable. In early 2021, about 11.3 million Americans were enrolled in the Marketplace across the country.

The Individual Mandate Penalty

Technically speaking, the individual mandate itself is still in effect. However, no penalty exists to enforce it. The tax penalty was eliminated after 2018 under the Tax Cuts and Jobs Act of 2017.

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The Individual Mandate In Summary

The individual mandate, a provision within the Affordable Care Act, required individuals to purchase minimum essential coverage – or face a tax penalty – unless they were eligible for an exemption. Imposed by the Affordable Care Act (ACA) of  2010, the health insurance mandate took effect in 2014. 

The reasoning behind the penalty followed lines of thinking that feared a healthcare market collapse if healthy people didn’t purchase healthcare insurance. Under the ACA, insurance companies were restricted in their ability to alter insurance rates based on the current health of the individual buying the insurance, and the concern was that without incentives or a mandate, healthier individuals would tend to opt out of the system, since they make fewer claims and their premiums support the claims of the less-healthy. As a result, insurance companies would then raise rates to make up the lost revenue, potentially increasing pressure on healthier individuals to opt out of buying health insurance and putting pressure on the system. Mandated insurance was intended to prevent such a downward spiral. This was the first time the federal government had enacted a mandatory purchase requirement.

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