Explaining the Individual Mandate for Obamacare

If you don’t know very much about the finer details of Obamacare, the nickname for the Affordable Care Act, you likely have still heard about the somewhat mysterious individual mandate. The idea behind Obamacare’s individual mandate is to encourage as many Americans as possible to obtain to health insurance. Although, its specifics make it one of the least-liked aspects in the Affordable Care Act. This individual mandate is officially called “The Shared Responsibility Payment for Not Maintaining Essential Coverage,” and this is somewhat essential to our current healthcare system. The more people who pay for insurance, the more money there is for insurance companies and other healthcare providers to provide healthcare services to patients. The simple explanation for the individual mandate is this: Every American must obtain, and maintain, health insurance or an exemption for obtaining health insurance, otherwise he or she must pay a tax penalty for the duration of the year for which they do not have insurance coverage.

The premise behind this mandate is positive and logical. It only makes sense for the government to encourage its citizens to obtain the bare minimum of health insurance. This mandate will likely help Americans in the long run and could potentially save people thousands of dollars in medical fees if anything should happen to them while uninsured. The issue with this mandate is that many Americans remain uninsured for whatever reason. The people who would opt out of this individual mandate and would get locked into paying the penalty are often illegal immigrants, lower-income individuals, people who cannot afford to pay for health insurance and many more. Those who cannot afford to purchase minimum coverage health insurance may be exempt. However, the ‘income exemption’ applies to those only paying for coverage that would cost more than eight percent of their annual income. So, it still excludes many low-income Americans who can’t afford it, and then, they still end up having to pay the tax penalty.

This tax penalty is tricky because it is set to rise year after year. Now, this may no longer be an issue if the current administration is able to agree on a suitable replacement to put up, in place of the Affordable Care Act, but there is still an entire calendar year before that potential replacement could go into effect. Even in the two years since Obamacare was put into place, the individual mandate penalty has increased. At the start, in 2015, the penalty for a single uninsured adult was $325 annually, or two percent of your household income above the tax return threshold for your filing level. Whichever of the two were greater was your penalty payment. One year later, for 2016, the individual tax penalty jumped up to $695 or 2.5 percent. This increase is a huge leap from one year to the next, and it is only set to increase as the years go on. The positive side of these increased penalty fees is that year after year, the penalty flat fee cannot exceed the national yearly premium for the bronze coverage plan. The bronze plan is the minimum coverage plan available to Americans. So, there is a threshold for the mandate penalty cost, even if it will steadily increase.

As mentioned, the thought process behind this individual mandate is solid. More Americans should have healthcare coverage, and that is a positive stance to be taking from a government level. However, the logistics of this mandate are a little shaky, because there are still many Americans who do not have the means to procure coverage that must pay this penalty. This is not a perfect system, and it is certainly something lower-income Americans need to keep an eye on, in case of unemployment or job loss. The fees are meant for any time you are uninsured. There is the positive potential that the replacement healthcare plan the Trump administration and the Republican party comes up with will eliminate the individual mandate, and that this penalty fee will vanish. Unfortunately, as we saw from the first attempt at “repeal and replace,” the replacement option also eliminates many aspects of the Affordable Care Act that Americans do like and would not want taken away, such as no denial for pre-existing conditions.