Health Reform Navigator

Health Care Reform’s Individual Mandate Upheld as a Tax by Supreme Court

Beginning in 2014, U.S. residents who fail to purchase “minimum essential” health insurance coverage will be subject to a tax penalty under the Affordable Care Act (ACA), unless they are exempt or covered by an employer-sponsored health insurance policy or a public program, such as Medicare, Medicaid, or the VA. 

Since the ACA does not outlaw the failure to maintain minimum coverage, but merely imposes a tax on those who do not buy insurance, the U.S. Supreme Court today upheld the individual mandate as within Congress’s power to “lay and collect taxes…The payment is not so high that there is really no choice but to buy health insurance;…and the payment is collected solely by the IRS through the normal means of taxation,” the Court reasoned.

Tax Penalty

The tax penalty for not having minimum essential coverage will be phased in over three years, beginning in 2014.  The penalty will be the greater of a flat dollar amount or a percentage of the individual’s taxable income above the tax threshold amount.  In 2014, an individual would pay $95 or 1% of income, whichever is greater; in 2015, a flat $325 or 2% of income; in 2016, a flat $695 or 2.5% of income.  For example, if an individual's taxable income is $50,000 and the tax threshold amount is $10,000, the penalty in 2014 would be $400.  Generally, the annual penalty is capped at an amount equal to the national average premium for Bronze coverage in qualified health plans.

Exemptions

Those who fail to comply with the ACA will be required to pay a tax penalty to the IRS, unless they are exempt from the mandate.  Individuals with an income below the tax filing threshold or who cannot afford coverage (cost of purchasing insurance exceeds 8% of income) are exempt from the mandate.  Individuals with a coverage gap of less than three months are also exempt.  Others exemptions are available on the basis of hardship or religious objections, and for Native Americans, incarcerated individuals, and undocumented aliens.

Important expansions of health care coverage have already taken effect under the Affordable Care Act (ACA), however these improvements may be lost if the health care reform law is struck down by the U.S. Supreme Court, which is currently reviewing the ACA's constitutionality.  Here are some of the new benefits that may be overturned by the Supreme Court:

• Insurers must cover preventive services with no co-payments or deductibles.
• Insurers may not arbitrarily cancel your coverage when you get sick, except in cases of fraud.
• Insurers may not impose lifetime coverage limits and or set annual limits below certain levels.
• Medicare beneficiaries with Part D coverage who entered the "donut hole" in 2011 began receiving a 50 percent discount on brand-name drugs.  The donut hole will be eliminated in 2020 under the ACA.
• Medicare co-payments and deductibles for preventive services were eliminated in 2011.
• Children who don't get health care coverage from their employers may stay on their parents' plans until age 26.
• Insurers may not deny coverage to a dependent child under age 19 because of a preexisting condition and, in 2014, may not deny coverage to any person because of a pre-existing condition or disability.

More information about health care reform is available on the Federal Health Care Reform Resource Page of the Texas Department of Insurance.

The Obama administration has launched the first national plan to eliminate the burden of Alzheimer’s disease, which afflicts 5.1 million Americans.  The National Plan to Address Alzheimer’s Disease has the ambitious goal of preventing and effectively treating Alzheimer's and related dementias (AD) by 2025.  The five goals of the national plan are:

1. Prevent and Effectively Treat Alzheimer’s Disease by 2025
2. Enhance Care Quality and Efficiency
3. Expand Supports for People with Alzheimer’s Disease and Their Families
4. Enhance Public Awareness and Engagement
5. Improve Data to Track Progress

The initiative will provide increased funding of Alzheimer’s research, including the first large-scale clinical trial of an experimental drug to prevent the development of AD in people who are at higher risk for the disease, but do not yet show symptoms.  To read the news release of the U.S. Department of Health and Human Services, click here.