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Questions and Answers on the Individual Shared Responsibility Provision

Basic Information 

1. What is the individual shared responsibility provision?

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. The  individual shared responsibility provision requires each individual to have qualifying health care coverage (known as minimum essential coverage) for each month, qualify for an exemption from coverage, or make a shared responsibility payment when filing his or her federal income tax return. 

Under the Tax Cuts and Jobs Act, taxpayers must continue to report coverage, qualify for an exemption, or pay the individual shared responsibility payment for tax years 2017 and 2018. 

2. Who is subject to the individual shared responsibility provision?

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.

3. What is minimum essential coverage?

Minimum essential coverage includes the following:

  • Employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage
  • Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace, health insurance offered by certain student health plans and catastrophic coverage
  • Coverage under government sponsored programs including Medicare Part A coverage and Medicare Advantage plans
  • Most Medicaid coverage
  • Children's Health Insurance Program (CHIP) coverage
  • Certain types of veterans health coverage administered by the Veterans Administration
  • Most types of TRICARE coverage
  • Coverage provided to Peace Corps volunteers
  • Coverage under the Nonappropriated Fund Health Benefit Program
  • Refugee Medical Assistance supported by the Administration for Children and Families
  • Coverage through a Basic Health Program (BHP) standard health plan
  • Coverage under an expatriate health plan
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
  • State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)
  • Other coverage recognized by the Secretary of HHS as minimum essential coverage

Minimum essential coverage does not include coverage providing only limited benefits, such as stand-alone vision and dental plans, workers' compensation cover-age, and coverage limited to a specified disease or illness.

Review the instructions for Form 8965, Health Coverage Exemptions, for more information.

4. What are the statutory exemptions from the requirement to have minimum essential coverage?

  1. Religious conscience. You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
  2. Health care sharing ministry. You are a member of a health care sharing ministry.
  3. Indian tribes. You are (1) a member of a federally recognized Indian tribe or (2) an individual eligible for services through an Indian care provider.
  4. Income below the income tax return filing requirement. Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).
  5. Short coverage gap. You went without coverage for less than three consecutive months during the year. For more information, see question 22.
  6. Hardship. You have suffered a hardship that makes you unable to obtain coverage, as defined in final regulations issued by the Department of Health and Human Services. See question 21 for more information on claiming hardship exemptions..
  7. Affordability. You can’t afford coverage because the minimum amount you must pay for the premiums is more than a certain percentage of your household income.
  8. Incarceration. You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
  9. Not lawfully present. You are not lawfully present in the U.S. and are not a  U.S. citizen, or U.S. national.

Review the instructions for Form 8965, Health Coverage Exemptions, for more information.

5. What do I need to do if I want to be sure I have minimum essential coverage or an exemption?

The vast majority of coverage that people have today is minimum essential coverage. For those who do not have coverage, who anticipate discontinuing the coverage they have currently, or who want to explore whether more affordable options are available, the Health Insurance Marketplace is open in every state and the District of Columbia. The Marketplace helps individuals compare available coverage options, assess their eligibility for financial assistance and find minimum essential coverage that fits their budget.

For those seeking an exemption from the individual responsibility provision, the Marketplace is able to provide certificates of exemption for some of the exemption categories. HHS has issued final regulations on how the Health Insurance Marketplace grants these exemptions. Individuals will also be able to claim most exemptions when they file their federal income tax returns. Individuals who are not required to file a federal income tax return because their gross income falls below the return filing threshold do not need to take any further action to secure an exemption. See question 21 for further information on how to claim an exemption.

For more information about the Marketplace, visit the Health Insurance Marketplace website. For more information about financial assistance, see our Questions and Answers on the premium tax credit.

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Who is Affected? 

6. Are children subject to the individual shared responsibility provision?

Yes. Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year. Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

7. Are senior citizens subject to the individual shared responsibility provision?

Yes. Senior citizens must have minimum essential coverage or qualify for an exemption for each month in a calendar year. Both Medicare Part A and Medicare Part C (also known as Medicare Advantage) qualify as minimum essential coverage.  

8. Are all individuals living in the United States subject to the individual shared responsibility provision?

All U.S. citizens living in the United States are subject to the individual shared responsibility provision as are all permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes. This category includes nonresident aliens who meet certain presence requirements and elect to be treated as resident aliens. For more information see Pub. 519

Foreign nationals who live in the United States for a short enough period of time that they do not become resident aliens for federal income tax purposes are exempt from the individual shared responsibility payment even though they may have to file a U.S. income tax return. The IRS has more information available on when a foreign national becomes a resident alien for federal income tax purposes. Individuals who are exempt under this rule include:

  • Nonresident aliens;
  • Dual-status aliens in their first year of U.S. residency;
  • Nonresident aliens or dual-status aliens who elect to file a joint return with a U.S. spouse;
  • Individuals who file a Form 1040NR or Form 1040NR-EZ (including a dual-status tax return for their last year of U.S. residency); and
  • Individuals who are claimed as a personal exemption on a Form 1040NR or Form 1040NR-EZ.

In addition, individuals who are not lawfully present in the United States and not U.S. citizens or U.S. nationals are exempt from the individual shared responsibility provision. For this purpose, an immigrant with Deferred Action for Childhood Arrivals (DACA) status is considered not lawfully present and therefore is eligible for this exemption.  An individual may qualify for this exemption even if he or she has a Social Security number (SSN).

Individuals who file a Form 1040NR or Form 1040NR-EZ, or are claimed as a personal exemption on one of those forms, do not need to take any action to claim an exemption from the individual shared responsibility provision. Other individuals who qualify for an exemption and file a U.S. income tax return should attach Form 8965, Health Coverage Exemptions, to claim the exemption.

9. Are US citizens and U.S. residents living abroad subject to the individual shared responsibility provision?

Yes. However, U.S. citizens who are physically present in a foreign country or countries for at least 330 full days during any period of 12-consecutive months are exempt from the individual shared responsibility payment for any month in the tax year that is included in that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an uninterrupted period which includes an entire taxable year are exempt for that year. Resident aliens who are citizens or nationals of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and who are bona fide residents of a foreign country for an uninterrupted period that includes an entire tax year also are exempt. In general, these U.S. citizens and U.S. residents are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this exemption even if they cannot use the exclusion for all of their foreign earned income because, for example, they are employees of the United States. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for further information on the foreign earned income exclusion.  Individuals who qualify for this exemption should file Form 8965, Health Coverage Exemptions, with their federal income tax returns.

U.S. citizens who meet neither the physical presence nor residency requirements will need to maintain minimum essential coverage, qualify for a coverage exemption or make a shared responsibility payment. For this purpose, minimum essential coverage includes a group health plan provided by an overseas employer and certain expatriate health plans. One exemption that may be particularly relevant to U.S. citizens living abroad for a small part of a year is the exemption for a short coverage gap. This exemption provides that no shared responsibility payment will be due for a once-per-year gap in coverage that lasts less than three months.  See Question 22 for more information on the short coverage gap exemption. 

10. Are residents of the territories subject to the individual shared responsibility provision?

All bona fide residents of the United States territories are exempt from the individual shared responsibility provision. Individuals who qualify for this exemption should file Form 8965, Health Coverage Exemptions, with their federal income tax returns.

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Minimum Essential Coverage 

11. If I receive my coverage from my spouse’s employer, will I have minimum essential coverage?

Yes. Employer-sponsored coverage generally is minimum essential coverage. (See question 5 for information on specialized types of coverage that are not minimum essential coverage.) If an employee enrolls in employer-sponsored coverage for himself and his family, the employee and all of the covered family members have minimum essential coverage.

12. Do my spouse and dependent children have to be covered under the same policy or plan that covers me?

No. You, your spouse and your dependent children do not have to be covered under the same policy or plan. However, you, your spouse and each dependent child for whom you may claim a personal exemption on your federal income tax return must have minimum essential coverage or qualify for an exemption, or you will owe a shared responsibility payment when you file a return.

13. My employer tells me that our company’s health plan is “grandfathered.” Is my employer’s plan minimum essential coverage?

Yes. Grandfathered group health plans are minimum essential coverage.

14. I am a retiree, and I am too young to be eligible for Medicare. I receive my health coverage through a retiree plan made available by my former employer. Is the retiree plan minimum essential coverage?

Yes. Retiree health plans generally are minimum essential coverage.

15. I work for a local government that provides me with health coverage. Is my coverage minimum essential coverage?

Yes. Employer-sponsored coverage is minimum essential coverage regardless of whether the employer is a governmental, nonprofit or for-profit entity.

16. Do I have to be covered for an entire calendar month to avoid the shared responsibility payment liability for not having minimum essential coverage for that month?

No. You will be treated as having minimum essential coverage for a month as long as you have coverage for at least one day during that month.

17. If I change health coverage during the year and end up with a gap when I am not covered, will I owe a payment?

Individuals are treated as having minimum essential coverage for a calendar month if they have coverage for at least one day during that month. Additionally, as long as the gap in coverage is less than three consecutive months, you may qualify for an exemption and not owe a payment.

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Exemptions 

18. If I think I qualify for a coverage exemption, how do I obtain it?

It depends on the coverage exemption for which you may qualify. Most exemptions from the coverage requirement can be claimed when the tax return is filed. Certain exemptions are available only through the Health Insurance Marketplace who will issue an exemption certificate number to the taxpayer.

If you can't check the "Full-year health care coverage or exempt" box on page 1 of Form 1040, and if you or another member of your tax household was granted a coverage exemption from the Marketplace that didn’t cover every month of 2018, complete Part I of Form 8965. If you or another member of your tax household is claiming a coverage exemption that didn’t cover every month of 2018 on your tax return, complete Part III of Form 8965. If your household income or your gross income is less than your filing threshold, you can check the “Full-year health care coverage or exempt” box on Form 1040. You don't need to file Form 8965. Depending on your situation, you may need to complete one or more parts of the form will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and file it with your Form 1040. These forms can all be prepared and filed electronically

Review the instructions for Form 8965, Health Coverage Exemptions, for more information.

19. What qualifies as a short coverage gap?

In general, a gap in coverage that lasts less than three months qualifies as a short coverage gap. If you have more than one short coverage gap during a year, the short coverage gap exemption only applies to the first gap. If you have a coverage gap of 3 months or more, you are not exempt for any of those months.

If you do not have coverage for a continuous period that begins in one taxable year and ends in the next, for purposes of applying the short coverage gap rules to the first taxable year, the months in the second taxable year included in the continuous period are not counted. For purposes of applying the short coverage gap rules to the second year, the months in the first taxable year are counted.

Review the instructions for Form 8965, Health Coverage Exemptions, for more information

20. If my income is so low that I am not required to file a federal income tax return, do I need to do anything special to claim an exemption from the individual shared responsibility provision?

No. If you are not required to file a federal income tax return for a year because your gross income is below your return filing threshold, you are automatically exempt from the shared responsibility provision for that year and do not need to take any further action to secure an exemption. If you are not required to file a tax return for a year but file one anyway, and your household income or your gross income is less than your filing threshold, you can check the “Full-year health care coverage or exempt” box on Form 1040. You don't need to file Form 8965.

21. If I am exempt from the shared responsibility payment, can I still be eligible for the premium tax credit?

In many cases, yes, but it depends upon the exemption. If you are exempt because you are incarcerated or because you are not lawfully present in the United States, you are not eligible to enroll in a qualified health plan through the Marketplace and therefore cannot claim a premium tax credit for your own coverage. However, individuals with other types of exemptions may obtain coverage through the Marketplace and claim a premium tax credit if they otherwise qualify for the credit.

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Reporting Coverage or Exemptions or Making Payments 

22. Does the individual shared responsibility provision affect my federal tax return? 

Yes. You will account for coverage or coverage exemptions or make a payment when you file your federal tax return. Insurers and other coverage providers are required to provide certain information to everyone they cover during the year. This information, which may be reported on a Form 1095-A, 1095-B or 1095-C, will help individuals demonstrate they had coverage during the calendar year. See Health Care Information Forms Questions and Answers for more information about Form 1095-A, 1095-B or 1095-C.

23. How do I report that I had coverage for each month of the year?

If you and all of your dependents had coverage for each month of the tax year, you will indicate this on your tax return simply by checking a box on your Form 1040.

24. How do I report or claim a coverage exemption on my tax return?

The 2018 Form 1040 includes a checkbox called “Full-year health care coverage or exempt.” You will now check that box if you, your spouse (if filing jointly), and anyone you can or do claim as a de-pendent had qualifying health care coverage or a coverage ex-emption that covered all of 2018 or a combination of qualifying health care coverage and coverage exemptions for every month of 2018. If you can check the box on Form 1040, you don’t need to file Form 8965.

If you can't check the "Full-year health care coverage or exempt" box on page 1 of Form 1040, and if you or another member of your tax household was granted a coverage exemption from the Marketplace that didn’t cover every month of 2018, complete Part I of Form 8965. If you or another member of your tax household is claiming a coverage exemption that didn’t cover every month of 2018 on your tax return, complete Part III of Form 8965. If your household income or your gross income is less than your filing threshold, you can check the “Full-year health care coverage or exempt” box on Form 1040. You don't need to file Form 8965. Depending on your situation, you may need to complete one or more parts of the form.

If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. Keep this notice with other important tax information. 

You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965.

If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed. If you claim the exemption on your tax return, you do not need an ECN from the Marketplace.

You do not need to call the IRS or obtain the exemption in advance for a coverage exemption that you qualify to claim on your tax return, all you need to do is file Form 8965 with your tax return.

See the instructions for Form 8965  for more information.

25. What do I need to do if I am required to make a payment with my tax return?

If you have to make an individual shared responsibility payment, you will use the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due. The amount due is reported on Schedule 4, line 61 of Form 1040. You only make a payment for the months you or a member of your household did not have coverage or qualify for a coverage exemption.

26. What happens if I owe an individual shared responsibility payment, but I cannot afford to make the payment when filing my tax return?

The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

 

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