Employee Benefits-IRS Issues Questions and Answers on the Individual Shared Responsibility Provision Of The Affordable Care Act

Not strictly employee benefits, but on January 30, 2013, the Internal Revenue Service (“IRS”) issued guidance, in the form of Questions and Answers (“Q &As”), on the Individual Shared Responsibility Provision Of The Affordable Care Act. In sum, here is what the IRS said.

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting on January 1, 2014, the individual shared responsibility provision (the “Provision”) calls for each individual to either: (1) have minimum essential healthcare coverage (known as “minimum essential coverage” or “MEC”) for each month, (2) qualify for an exemption, or (3) make a payment when filing his or her federal income tax return. The Provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.

MEC includes, at a minimum, all of the following:

• Employer‐sponsored healthcare coverage (including COBRA coverage and retiree coverage) for an employee and spouse;

• Healthcare coverage purchased in the individual market;

• Medicare coverage (including Medicare Advantage);

• Medicaid coverage;

• Children’s Health Insurance Program (CHIP) coverage;

• Certain types of Veterans health coverage; and


MEC does not include specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition.

An individual is exempt from the requirements of the Provision if:

(1) the individual’s household income is below the minimum threshold for filing a tax return;

(2) the individual went without coverage for less than three consecutive months during the year;

(3) an Affordable Insurance Exchange has certified that the individual has suffered a hardship that makes him or her unable to obtain coverage;

(4) the individual cannot afford coverage because the minimum amount that must be paid for the premiums is more than eight percent of his or her household income;

(5) the individual is a member of (a) a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits, (b) a recognized health care sharing ministry, or (c) a federally recognized Indian tribe; or
(6) the individual is (a) in a jail, prison, or similar penal institution or correctional facility after the disposition of charges, or (b) neither a U.S. citizen, a U.S.national, nor an alien lawfully present in the U.S.