Health Insurance Requirement

October 9, 2013 Gregory Wald

The requirement to buy health insurance, also known as the individual mandate, is a key provision of the Affordable Care Act (ACA). If individuals are not covered through their employers, they will be required to obtain health insurance on their own. Failure to have qualifying health insurance coverage may result in a financial penalty. The individual mandate was originally scheduled to take effect on January 1, 2014, but has been delayed until April 1, 2014.

Individuals and families that don't make enough money to be required to file an income tax return are exempt from the financial penalty. Others who can prove religious objections, those for whom the lowest-cost plan option exceeds 8 percent of their annual income, undocumented immigrants, incarcerated people, American Indians with coverage through the Indian Health Service and Americans living outside of the U.S. are also exempt from the individual mandate.

For 2014 the tax penalty for not having qualifying insurance equates to $95 per adult and $47.50 per child per year or 1 percent of annual income in excess of income tax filing threshold, whichever is greater. The amount of tax penalties for not having insurance are scheduled to increase in future years.

The Internal Revenue Service will collect the financial penalty as part of individual income tax filings.

The individual mandate provides balance for another ACA provision which states that everyone can purchase insurance, despite their medical history and sick people cannot be charged more than healthy people.

For the average consumer, insurance could be unaffordable without the mandate. Here's why:

  • Health insurance, like any other type of insurance, works to spread risk. Premiums can be held down when there's a balance of healthy people covered along with those who use a lot of medical services.
  • Without the mandate, most people would have an incentive to wait until they become sick before purchasing insurance. So rather than the risk being shared among the sick and healthy; the risk would be spread among those who frequently use health care services, causing premiums to rise.

To learn more, visit our health care reform site at