ACA Qualities

In recent years, much has been said about the tax penalty required by the Affordable Care Act (ACA). You might have heard this tax penalty referred to as the “individual mandate.”

In the simplest terms, you will be required to pay this penalty if you can afford health insurance but are not signed up for a plan. Many people are still confused by this requirement, so we want to answer some of the most basic questions, such as how much your family must pay and how you can be exempt from the ACA tax penalty

What is the ACA tax penalty or individual mandate?

One of the most significant accomplishments of the ACA is the concept of guaranteed issue. This means that no one can be denied healthcare based on a pre-existing condition. Under the ACA, everyone is eligible for health insurance, regardless of their health at the time they sign up. Prior to the ACA, this wasn’t always the case, and health insurance providers used to deny coverage to millions.

To offset the cost accrued by providers who are now covering more people with potentially costly medical conditions, the penalty is a necessity to ensure that a healthy base of customers are buying insurance. In essence, health insurance companies can only afford to cover sick people if healthy people are paying for insurance too.

How much will I owe if I don’t have health insurance?

The penalty for not having health insurance is calculated based on an entire year and then applied based on how many months you and your family members go without coverage. You will then pay the fee in addition to your federal tax filing for the year. If you fail to pay the fee, the total will be withheld from your next federal tax return.

There are two ways to calculate the fee. You will either pay a percentage of your household income or per person who isn’t covered. You pay the higher fine.

In 2016, fees are calculated as follows:

  • 2.5% of household income, up to a maximum of the total yearly premium for the national average price of a Bronze plan sold through the ACA Marketplace.
  • $695 per adult (individuals age 18+) and $347.50 per child, up to a maximum of $2,085

Again, the total fee is assessed on a monthly basis, so you will pay a twelfth of the total for every month you and your family are not covered.

The tax penalty for the ACA will increase every year based on the current rate of inflation. As an idea, here are the numbers for fees in the previous years since the ACA went into effect.

In 2015:

  • 2% of household income
  • $325 per adult, $162.50 per child ($975 maximum)

In 2014:

  • 1% of household income
  • $95 per adult, $47.50 per child ($285 maximum)


The tax penalty will continue to get steeper as more people are enrolled in coverage. Regardless of how healthy you think you are, it makes sense from a medical and financial standpoint to sign up for health insurance – the sooner the better.

Luckily, we can help you with that. Osborne Insurance Services specializes in finding the best plan for your needs, and every member of our staff is an expert navigator of the ACA and its marketplace. There’s no reason for you to pay the tax penalty when you’re working with us to manage your plan.

How can I be exempt from the ACA tax penalty?

The Affordable Care Act grants a number of exemptions to the individual mandate for those who cannot afford health insurance or who find themselves in circumstances where they are not covered.

Basic exemptions to the individual mandate include the following:

  • Short Coverage Gap: If you go less than three consecutive months without coverage, you will be exempt from the penalty for those months. If you have more than one coverage gap of less than three consecutive months within the same year, you will only be exempt for the first gap.
  • Low Income/No Filing Requirement: If you do no owe federal income taxes based on the IRS’s filing threshold, you are exempt from the penalty.
  • Medicaid Expansion and Rejection: If you applied for Medicaid and were rejected or if your state failed to expand Medicaid under the provisions of the ACA, you are exempt.
  • Unaffordable Coverage Options: If the cost of healthcare would be more than 8% of your household income, you may be exempt.
  • Hardship: The ACA allows for a number of hardships that can excuse an individual from the penalty. If you think you qualify for this exemption, we can help you confirm and apply for it.

Many of these exemptions require that you submit an application. We will be more than happy to go over the full list and help you apply for any exemption that you might qualify for. Get in touch with us at Osborne Insurance Services if you have any questions about the Affordable Care Act, the individual mandate, or any other personal healthcare related matter.

Tags: Open Enrollment Period