Proposed Rules Outline Penalties Under ACA’s Individual Mandate

On Wednesday, the Obama administration published proposed rules outlining how the government would levy the penalties for noncompliance with the Affordable Care Act's individual mandate, which takes effect Jan. 1, 2014, The Hill's "Healthwatch" reports. 

HHS in a fact sheet about the rules said the penalty would apply "only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage." HHS added that the penalty would be imposed on less than 2% of U.S. residents, according to Congressional Budget Office estimates. 

The rules include exemptions from the mandate for several groups, including undocumented immigrants and low-income residents in states that have chosen not to participate in the ACA's Medicaid expansion. Short coverage gaps also would not trigger the penalty -- one day of insurance coverage per month would count has having coverage for the entire month, according to the proposed rules (Baker [1], "Healthwatch," The Hill, 1/30).

The penalty also would not be imposed retroactively -- so individuals would not be fined if they cannot obtain affordable coverage at the beginning of the year but end up with more income at the end of the year (Baker [2], "Healthwatch," The Hill, 1/30).

Meanwhile, the rules stipulate that states that have chosen to run their own health insurance exchanges would be able to use a "federally managed service" to determine applicants' eligibility for exemptions. 

The proposed rules are now open for public comment (Daly, Modern Healthcare, 1/30).

Rules Maintain Affordability Provision

The rules retain a controversial provision in the ACA that bases whether U.S. residents get subsidies to help purchase health coverage on the cost of an individual plan instead of a family plan, "Healthwatch" reports. 

The proposed rules define "affordable" coverage as a plan that costs less than 9.5% of a household's income.

However, that standard applies only to individual policies, so a worker who could purchase an affordable individual policy would not receive the subsidy, even if he or she purchases a family plan that costs more than 9.5% of his or her household income. As a result, many families might not receive the subsidies (Baker [3], "Healthwatch," The Hill, 1/30).

The uninsured children and spouse of an employee with work-sponsored coverage would be exempt from penalties if the employer-offered family plan costs more than 8% of the household income.

Jocelyn Guyer, executive director of Georgetown University's Center for Children and Families, said, "This is bad news for kids," adding, "They will lack access to affordable employer-based family coverage and still be locked out of tax credits to help them buy coverage for their kids in the marketplaces, or exchanges, being established in every state" (Pear, New York Times, 1/30).

Ron Pollack, executive director of Families USA, said the issue must be fixed by Congress and "not the regulatory process." However, there is little chance that lawmakers will fix the "affordability glitch" because House Republicans still favor repealing the entire ACA, according to the AP/Miami Herald (Alonso-Zaldivar, AP/Miami Herald, 1/30).