Thanks to the tax reform, beginning in 2019, the penalty for not having adequate health insurance, which the government refers to as the “individual shared responsibility payment,” will no longer apply.
The elimination of this penalty as of 2019 does not impact the health care subsidy for low-income families, which is known as the premium tax credit and which is available for policies acquired through a government insurance marketplace. This elimination also does not affect the penalties assessed on employers that do not offer affordable insurance to employees and that have 50 or more full-time-equivalent employees.
However, the penalty still applies for individual taxpayers who did not have minimum essential health coverage for 2018 and is the greater of the sum of the family’s flat dollar amounts or 2.5% of the amount by which the household’s income exceeds the income-tax-filing threshold.
Beginning in 2014, the Affordable Care Act, also known as Obamacare, imposed what a “share-responsibility payment” on taxpayers who did not sign up for minimum essential health coverage. This payment is essentially a penalty for not being insured.
The penalty was phased in during 2014 and 2015, and it became fully effective in 2016. The penalty also began to be inflation adjusted after 2017.
The penalty for 2018 is the greater of the sum of the family’s flat dollar amounts or 2.5% of the amount by which the household’s income exceeds the income-tax filing threshold.
For 2018, the flat dollar amounts are $700 per year ($58.33 per month) for each adult and $350 per year ($29.17 per month) for each child; the maximum family penalty using this method is $2,100 per year ($175 per month).
The House of Representatives on May 4, 2017, by a vote of 217 to 213 down party lines, passed the GOP’s proposed American Health Care Act (AHCA). The AHCA would repeal and replace several provisions of the Affordable Care Act (ACA). It next goes to the Senate, where it will no doubt receive some modifications even if it does pass. It needs only a simple majority to pass the Senate and cannot be filibustered.
Although the exact details are not available, we have gone back and resurrected some details from the original draft legislation published last March 6 to give you an idea of the how the AHCA will function. However, keep in mind that some provisions were modified with respect to existing conditions in order to obtain enough Republican votes to pass the bill.
On March 6, the House Republicans unveiled their draft legislation that would repeal and replace the Affordable Care Act (ACA). In general, the GOP’s plan would continue the ACA’s premium tax credit through 2019 and then replace it in 2020 with a new credit for individuals without government insurance and those who are not offered insurance by their employer. However, most of the ACA’s insurance mandates and penalties would be repealed after 2015. Other provisions will be overturned periodically through 2019.
Additional details are provided in our blog, but keep in mind the legislation is draft legislation and is subject to changes before coming up for vote.