Starting in 2014, the Affordable Care Act (ACA) requires that most people have health insurance or pay a penalty if they do not. Coverage may include employer-provided insurance or insurance purchased on the individual market.
The penalty -- which amounts to a tax based on the Supreme Court ruling upholding the law -- for people who forgo insurance is the larger of two amounts: a dollar amount or a percentage of income. For example, in 2014, if people do not buy insurance as an adult, they will pay either $95, or 1 percent of their family income, whichever is greater. For a child, the penalty is $47.50. The maximum penalty for a family would be either $285, or 1 percent of income.
The penalty increases with time. In 2015, it would be $325 for an adult and $162.50 for a child (with a family maximum of $975), or 2 percent of family income, whichever is greater. In 2016 and later, it would be $695 for an adult and $347.50 for a child (with a family maximum of $2,085), or 2.5 percent of family income, whichever is greater.
The Congressional Budget Office projects that 3.9 million people will pay a penalty in 2016. The total penalty someone can pay will be limited to the average of the cost of a basic insurance policy sold through the public exchanges, starting in 2014.
It would be up to the IRS to verify that individuals comply with the health insurance mandate, and to collect any tax penalty from them if they aren’t.
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