The Individual Mandate: Repealed, But Not Gone Yet

The new tax reform law eliminated the Affordable Care Act's penalty for not having health insurance — but not until the 2019 tax year. Here's what taxpayers need to know about the individual mandate.

In his recent State of the Union address, President Donald Trump praised a change to the Affordable Care Act in the recently enacted tax reform package. “The individual mandate is now gone,” he said.

President Trump was referring to the requirement to have health insurance or pay a tax penalty.

But even though Congress did effectively eliminate the individual mandate, it’s still in effect for the 2017 and 2018 tax years. Americans need to know the details as tax season gets in full swing.

First, some history

The Affordable Care Act — the 2010 law often called Obamacare — included the mandate as a way keep insurance premiums affordable.

Other parts of the law prohibited insurers from denying coverage or charging consumers higher premiums based on pre-existing conditions, and the mandate was intended to make sure healthy people — not just people who had an immediate need for medical care — purchased coverage.

The mandate, which took hold in 2014 for the 2013 tax year, required every American to have health coverage that met certain standards, called minimum essential coverage, or face a financial penalty unless they met certain exemptions.

For the 2017 tax year, the financial penalty for not having health care coverage is $695 per adult or 2.5 percent of household income, whichever is higher. The average penalty paid by uninsured Americans for the 2016 tax year was $708, per IRS estimates.

Taxpayers are asked on their returns whether they had minimum essential coverage for each month of the tax year. The IRS has signaled it will reject returns that lack a response to the question.

Tax forms

There are three IRS forms sent to taxpayers to help them determine if they fulfilled the requirement and document coverage if audited.

  • Form 1095-A is sent from the federal health insurance marketplace or state-based exchanges to people who enrolled in health insurance coverage through the marketplace.
  • Form 1095-B is sent from private health insurance providers or government agencies to people who had health insurance coverage.
  • Form 1095-C is sent from large employers to their employees. It gives information about coverage offered by the employer and in some cases whether a person enrolled in that coverage. This form may also help determine if a person is eligible for a premium tax credit for marketplace coverage.

End of the mandate

The individual mandate was always a particularly contentious part of the Affordable Care Act.

After failing to gather enough votes last year to make more extensive changes to the law, Republicans in Congress included the mandate repeal in their tax reform bill.

The bill, known as the Tax Cuts and Jobs Act of 2017, lowers the individual mandate’s tax penalty to $0 as of Jan. 1, 2019, effectively eliminating the requirement.

Tax form clarity

According to the IRS, “taxpayers must continue to report coverage, qualify for an exemption, or pay the individual shared responsibility payment for tax years 2017 and 2018.”

That means the federal marketplace and state-based exchanges will still issue 1095-A forms, health insurance providers will still issue 1095-B forms and employers will still issue 1095-C forms this year and next year.

The IRS provides more information on the tax forms associated with the individual mandate.

Meanwhile, Congress is considering proposals intended to stabilize health insurance premiums in the individual market.

The Congressional Budget Office projected that the mandate repeal would cause premiums to rise in the individual insurance market. Congress is considering legislation intended to stabilize premiums by offsetting the impact of high-cost enrollees.

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