Affordable Care Act ‘Shared Responsibility’- What are the tax payers’ responsibilities?

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The “Affordable Care Act” has come into being on 1st of January 2014. Under this act, the responsibility to ensure minimum essential health coverage for every individual is shared among a number of players, i.e. the individual, employer, insurer, state government and federal government. This applies to each month of a calendar year, i.e. January 1st to December 31st.

This act ensures that every individual will have a basic, standard level of health coverage – which is also known as “minimum essential coverage”. The act applies to every individual – children and adults. Those who already have achieved the minimum health care coverage, need not do anything on account on this act.

What Is “Minimum Essential Health Coverage”?

As mentioned earlier, under this act each individual in a family – adult or child – needs to have basic health care coverage, unless there is an exemption. This will be mentioned at the time of filing for federal income tax return. The options you have to ensure you have minimum essential coverage are among others:

• Your employer provides health insurance coverage
• You have purchased health insurance in your place of residence, where you’d qualify for financial assistance
• You are covered under a health care program sponsored by the Government (such as veterans’ health care program, Medicaid, Medicare, and so on)
• You have purchased health insurance directly from the insurance provider

If you live overseas for the whole year, it is considered that you have minimum health coverage.

In case you are in doubt on whether your health care coverage qualifies as “minimum essential health care coverage”, you should check out this chart!

What Are The Exemptions Under This Act?

It is important to note that the health care coverage should be effective every month of the year. You may claim exemption if you:

• Are unable to pay the minimum amount required for the annual premium because this exceeds 8% of your total household income;
• Have a three months’ consecutive gap in your health coverage;
• Have a religious exception;
• Are going through (recognized) hardship

To know whether you could qualify for an exemption, here is a chart that explains how these should be granted or claimed

When You Need To Make An Individual Shared Responsibility Payment?

If you find that you or any of your dependents do not have the minimum health coverage as required by the Affordable Care Act, and you do not fall under the acceptable exemptions, you will need to make a payment. This would be calculated as 1% of the household income that exceeds the income tax return filing threshold.. For 2014, the amount average to around $95 per adult in a household, $47.50 per child – and not more than $285 per family. For 2015 these fines are increased with fees up to 2% of the household income.