Individual Mandate – Final Regulations Issued

September 4, 2013

Authored by: benefitsbclp

Putting to rest the speculation that the individual mandate may be delayed, yesterday the Treasury Department and IRS issued final regulations regarding the individual mandate under the Affordable Care Act (“ACA”). The individual mandate requires individuals to maintain health insurance (i.e. “minimum essential coverage”) or pay a penalty (i.e. a “shared responsibility payment”).

The final regulations made a few clarifications but largely left unchanged the proposed regulations (released Jan. 30th). Individuals should go into 2014 with the expectation that they will pay the shared responsibility penalty unless they have minimum essential health care coverage.

Changes include the following:

• Specifically identifying the terms used in IRC § 5000A, which requires the shared responsibility payment, are the same terms otherwise used in the ACA (e.g. health insurance coverage, health insurance issuer, individual market, and state).

Minimum Essential Coverage:
• Clarifying that eligible employer-sponsored plans include plans issued on behalf of an employer.
• Modifying the definition of “self-insured group health plan” to be an eligible employer-sponsored plan, regardless of whether the plan could be offered in the large or small group market in a state.
• Clarifying (i) that qualified health plans offered through Exchanges are plans in the individual market and (ii) that a plan offered to one specific individual is a plan in the individual market only if the plan is health insurance coverage under the ACA.

Exempt Individuals:
• Clarifying that an individual eligible for continuation or retiree coverage because of a relationship to a former employee is treated in the same manner as the former employee.
• Removing the simplified method rule to determine the premium for the applicable plan.
• Including tobacco use as a characteristic of individuals in a taxpayer’s family that will be taken into account to identify the applicable plan.
• Clarifying that a taxpayer with household income below the applicable filing threshold who files a federal income tax return may claim the exemption on the filed tax return.
• Providing gaps in coverage prior to January 1, 2014 are not taken into account when measuring the length of a coverage gap in 2014.
• Noting that the authority to define circumstances giving rise to a hardship exemption (and authority to grant hardship exemptions) resides with the Department of Health and Human Services (“HHS”) and refers to the definition of hardship in the HHS regulations..

Computation of Shared Responsibility Payment:
• No substantive changes

Administration and Procedure:
• No substantive changes