CMS and IRS Publish Proposed Rules on Exemption to Individual Mandate Financial Penalty


CMS and the Internal Revenue Service (IRS) issued two proposed rules on January 30, 2013 setting forth the exemptions an individual may satisfy to avoid financial penalties associated with the Patient Protection and Affordable Care Act’s (PPACA) “individual mandate.”  PPACA requires individuals to possess health insurance that meets certain minimum coverage benchmarks, or else pay a financial penalty for forgoing coverage. The proposed regulations establish the criteria that would spare an individual from having to pay the penalty if he/she did not acquire minimum coverage.  As a result of these hardship exemptions, the Congressional Budget Office estimates that only two percent of Americans will actually pay the penalty.

Individuals will not be forced to pay the penalty if the health insurance exchange in that individual’s state determines that coverage available on the exchange would be unaffordable for the individual.  Moreover, individuals who would be eligible for Medicaid but for their State’s decision to refuse Federal funding to expand Medicaid eligibility also would be exempt from the penalty.  Individuals who are not otherwise required to file Federal income tax returns also would be exempt.  (Beginning in 2015, individuals who are required to file Federal income tax returns will indicate their hardship exemption on their 2014 returns.)

The CMS proposed rule is available here, and the IRS rule is available here.  Comments on the CMS proposal are due March 18, 2013, and comments to IRS are due March 2.

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253,

Topics:  Affordable Care Act, CMS, Exemptions, Health Insurance, Health Insurance Exchanges, Individual Mandate, IRS, Medicaid, Minimum Essential Coverage, Penalties

Published In: Insurance Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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