Suspending the Individual Mandate Penalty Law Equals Fairness Act

By Bonnie Bochniak
Vice President, Government Relations
MBPA/MFBA

March 31, 2014 – Early this month the United States House of Representatives passed a bill, H.R. 4118 “Suspending the Individual Mandate Penalty Law Equals Fairness Act.” This piece of legislation would delay the enactment of certain penalties related to the expansion of the health insurance coverage established by the Affordable Care Act (ACA). It would delay for one year the possible penalties associated with the requirement that most residents of the United States have health insurance coverage beginning in 2014.

Little refresher: Under current law, most residents of the United States are required to have health insurance coverage beginning in 2014(enrollment delays are in place and expiring soon). Those who do not comply are subject to the individual mandate penalty, which is the greater of a flat dollar amount or a percentage of income in excess of the income threshold for mandatory tax filing. The flat amount per uninsured adult is $95 and the percentage is 1.0%, for 2104.  It increases to $695 per person flat fee, and 2.5% of income in 2016. An overall cap will apply to family payments.  The individual mandate penalty will be adjusted for inflation after 2016, so stay tuned.

H.R. 4118 would keep in place the requirement to have health insurance in 2014, just without the penalties for failure to comply. The bill would also shift by one year the schedule of penalties for people who do not comply with the mandate, thus reducing the penalties for not having health insurance for future years. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that enacting H.R. 4118 would reduce federal deficits by roughly $10 billion over the 2014-2019 periods and by roughly $9 billion over the 2014-2024 periods. This savings would come from; fewer individuals enrolling for Medicaid and CHIP, savings from refundable tax credits, exchange subsidies savings, and other related ACA related expenses.

On the other side of the coin, the federal government will be losing the revenue expected from penalties charged to uninsured individuals.  The revenue for 2015 would be affected as those in non-compliance with the law in 2014 will pay in 2015. 

This legislation is now awaiting action in the United States Senate and MBPA’s government relations team will keep you posted as it continues to move through the democratic process. As always, please feel free to contact our team with any questions, comment, or suggestions. We like them all! Email: bbochniak@michbusiness.org or by phone: 586-393-8800.