Shared Responsibility

Mar 21, 2015 by

obamacare taxesThe impenetrable term “shared responsibility provision” has likely crossed your radar over the past year or two, and you probably have a vague sense it’s somehow related to the Affordable Care Act. The provision took effect for the 2014 tax year, so it impacts that federal tax return you’re putting off working on.

What’s the Shared Responsibility Provision?

The ACA’s individual shared responsibility provision requires that you and each member of your family either:

  • Have qualifying health coverage called minimum essential coverage
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment when you file your 2014 federal income tax return in 2015

Like most elements of the US tax code, this one requires more drilling down to understand what it means.

First, what’s “minimum essential coverage?”

Minimum essential coverage includes:

  • Most health insurance coverage provided by your employer (phew!)
  • Health insurance purchased through the Health Insurance Marketplace in the area where you live
  • Coverage provided under a government-sponsored program for which you are eligible (including Medicare, Medicaid, and health care programs for veterans)
  • Health insurance purchased directly from an insurance company
  • Other health insurance coverage that is recognized by the Department of Health & Human Services as minimum essential coverage

(Note: Americans living outside of the US like Ms. Money Counselor and I are considered to have minimum essential coverage. I presume that’s because the US is one of the very few countries—and the only first world country—lacking single-payer, universal health insurance coverage.)

Second, how would I know if I “qualify for a health coverage exemption” from the shared responsibility provision?

Well, you may be exempt if:

  • The minimum amount you must pay for the annual premiums is more than eight percent of your household income
  • You have a gap in coverage that is less than three consecutive months
  • You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

I know what you’re thinking after reading that last bullet: how can I get in on one of those groups explicitly exempt from the shared responsibility]requirement?

I wrote about this in Obamacare Exemption, so check out that article to get more details, but in a nutshell some of the ways you could gain an exemption include:

  • Become a member of a health care sharing ministry
  • Be a member of a Federally-recognized Indian tribe (no, you can’t create your own tribe)
  • Get yourself incarcerated
  • Join a religious sect conscientiously opposed to accepting insurance benefits (not sure if the Republican Party qualifies…)

No Minimum Essential Coverage or Exemption?

If you chose not to obtain minimum essential coverage in 2014 and can’t qualify for a shared responsibility provision exemption, you’re going to get dinged on your 2014 tax return for a “shared responsibility payment.”

How much?

First, for each 2014 month that you or any of your dependents didn’t have minimum essential coverage and didn’t qualify for a coverage exemption, you’ll owe an individual shared responsibility payment.

Now, direct from the IRS’ website, here’s a description of the amount:

In general, the annual payment amount is the greater of a percentage of your household income or a flat dollar amount, but is capped at the national average premium for a bronze level health plan available through the Marketplace. You will owe 1/12th of the annual payment for each month you or your dependent(s) don’t have either coverage or an exemption.

You’ll notice there’s no dollar amount in that paragraph. Here’s the part you’re really going to hate: To figure your shared responsibility payment, you must work through IRS Form 8965, Health Coverage Exemptions. After plodding through the worksheets in the form’s instructions, you’ll have your payment.

Once you’ve done that, perhaps you’ll decide any anti-Obamacare ideology you may harbor isn’t so important after all and buy minimum essential coverage for 2015. 🙂

Good luck!

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