The Affordable Care Act (ACA), or Obamacare, requires most U.S. citizens to obtain health coverage or pay a penalty. The individual shared responsibility provision, or individual mandate, is a key component of the ACA that’s designed to offset the insurance risk pool by encouraging healthy individuals to buy into the market, thus compensating for the costs for those who are unhealthy.
To avoid paying the penalty, individuals must obtain minimum essential coverage during an open enrollment period. For 2015, open enrollment runs from November 15, 2014 through February 15, 2015. For coverage effective January 1, 2015, applications should be completed by December 20, 2014.
Minimum essential coverage includes the following:
If you miss this deadline and don’t meet the exception requirements, you will be required to pay a penalty. Here’s a breakdown of penalties for individuals and families in 2015 and 2016:
Penalties for failing to comply with the law are collected by the Internal Revenue Service through the income tax process. The fee is based on the number of months in any given year an individual is without coverage.
If you choose to purchase coverage through the state-based marketplace, you may be eligible for a tax credit, which lowers the amount of money you pay out of pocket. Visit HealthCare.gov to find out if you qualify for health care tax credits.
If you’re still not sure whether the individual mandate applies to you, the Kaiser Family Foundation’s individual mandate flowchart can help you determine how it works.