The ACA and Legal Practices (#11) / Preparing for individual penalties

September 3, 2014

health-care-lawThis is installment #11 in a series of blog postings on the Affordable Care Act (ACA) and legal practices.

As part of the individual mandate, the ACA provides for penalties for those persons who have not arranged for satisfactory health care coverage for 2014. These penalties will be payable on 2014 income tax forms, due in 2015.

However, anticipating potential negative reactions by the public in early 2015, when this reality sinks in, the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) have moved aggressively to limit how broadly the penalties will be applied during this first year of ACA implementation.

In a public-relations move that is, of itself, not likely to be helpful, the penalty has been titled by the IRS as the “individual shared responsibility provision” of the ACA.

All citizens and legal residents must have “minimum essential coverage” or have an exemption—or make an extra payment on tax returns.

As it turns out, the strategy for reducing public backlash for 2014-2015 has been to define “minimum essential coverage” very broadly and to structure the exemptions as widely as possible.

In terms of coverage, ACA requirements may be met by employer plans; individual policies purchased from insurance companies or through Exchange marketplaces; certain student health plans; and government-sponsored programs (including Medicare and Medicaid) that include comprehensive coverage.

However, many government-sponsored health plans provide only limited benefits: included in this category are narrow types of Medicaid coverage, specialized insurance coverage (such as dental or vision policies, accidental or disability policies, or worker’s compensation insurance), some types of TRICARE coverage (for the military), AmeriCorps, and other restrictive coverage.

The IRS has announced that, for 2014, exemptions will be extended to individuals with such limited-benefit coverage (IRS Notice 2014-10).

The justification is that people enrolled in such plans “may not know that such coverage is not minimum essential coverage”.

Exemptions also include “members of certain religious sects”; those with short (less than 3-month) gaps in coverage; those for whom coverage is considered unaffordable; those with low incomes; members of Indian tribes and “health care sharing ministries”; those incarcerated; and those subject to “hardships”.

Hardships apply to “circumstances that prevent you from obtaining coverage under a qualified health plan”, those unable to access Medicaid because a state “does not participate in the Medicaid expansion”, or situations in which“health insurance will not be renewed and other plans are unaffordable”.

As is readily obvious, it will be difficult for many people to determine if they have “minimum essential coverage” or, if not, if they qualify for an exemption.

Many individuals may seek attorney assistance to sort out their situations. In some circumstances, such advice may be sought as a part of more general legal planning concerns.

More information about implementation of the Affordable Care Act and associated legal practice issues may be found in recent books on the ACA and on the health care system, other postings to this blog, and on the ACA Blog, also written by the author of this series.