As of 2019, individuals will no longer be charged a penalty for failing to carry health insurance. This has led many to declare the individual mandate dead. Here’s what it means for the Affordable Care Act (ACA) and health insurance, and why it might not be quite as dead as some think.
What is the individual mandate?
The individual mandate is the requirement to maintain health insurance that provides minimum essential coverage under the ACA. Individuals who don’t meet the requirements can be charged a penalty of up to $695 per adult.
However, a Republican tax bill that was passed in December 2017 eliminated the penalty. This means that Americans who decide not to carry insurance will not be fined as a result. Because the individual mandate no longer carries a penalty, many people consider it dead.
But wait …
Before you announce the individual mandate dead, however, it’s important to realize that the tax bill did not eliminate the individual mandate penalty immediately. In fact, the penalty didn’t stop until this year. This means that individuals who did not carry health insurance last year could still be charged a penalty in 2019 for not meeting the individual mandate in 2018.
Additionally, some states have responded by creating their own laws. According to CFO Daily News, New Jersey, Vermont and Washington, D.C. have passed their own individual mandate laws, and Massachusetts already had one.
What will the impact be?
Because the penalty was still in effect for 2018, some people may be unhappy when they file their taxes. The IRS says it is not allowed to use liens or levies to collect the individual mandate penalty, but it may deduct the fee from any refunds owed.
Going forward, some people may decide to drop coverage, especially if they are relatively young and healthy and don’t think they’ll need it much. A report from the Congressional Budget Office projected that getting rid of the individual mandate could result in 13 million fewer people having insurance by 2027.
What about the employer mandate and the rest of the ACA?
For now, the ACA remains law. Although the individual mandate no longer has teeth, other provisions, including the protections for people with pre-existing conditions, remain.
It’s also important not to confuse the individual mandate with the employer mandate. The employer mandate requires Applicable Larger Employers – those with 50 or more full-time employees – to offer health insurance providing minimum essential coverage. Unlike the individual mandate, it is still is full effect. If employers are found non-compliant, they may receive Letter 226-J notifying them of penalties owed.