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One of the most hotly debated and commonly misunderstood topics about Obamacare is the "Individual Mandate," which specifies that American must have health insurance. Often touted as a "big government takeover" of our healthcare system, the mandate was actually designed to help lower the cost of care and ultimately reduce the cost of insurance. Even after the Supreme Court ruled that it is constitutional to levy a tax against an "applicable individual" who fails to maintain health insurance coverage, opponents believe that they should not be required by the government to purchase anything.

Why was the Individual Mandate essential to the PPACA?

Rather than seeing this tax-enforced insurance mandate as a burden, proponents of the measure believe that it is the only way to fix our broken healthcare system. One of the main reasons why hospital costs have become so outrageously high is because so many uninsured Americans cannot pay for essential services. As a result, providers have had to increase the cost of hospitalization and diagnostic services, which has ultimately made insurance even less affordable for middle class families. Employers are faced with higher insurance costs as well, which has forced them to pass along more expensive premiums to employees. While all this is happening, insurance companies have cut back on their coverage and increased their co-pays. In short, without an individual mandate, there was no way to prevent the cost of healthcare from skyrocketing.

To whom does the Individual Mandate provision apply?

One common misconception about Obamacare is that it's "just another new tax," but this "tax" would only apply under certain conditions. The tax would be levied against an individual who fails to maintain health insurance for themselves and their dependents, unless they are otherwise exempted from doing so. A person may become exempt under specific conditions, the most common of which is their income. By design, this mandate ensures full participation by every U.S. citizen who is not exempt.

As the insurance rolls grow, the risk is spread among a much segment of the population. For people who are already covered by a group or individual health plan, nothing would change. The provision is aimed at individuals who can afford coverage but have chosen not to purchase it, thereby placing a greater burden on the healthcare system.

Who is exempted from the Individual Mandate?

Individuals who have already qualified for coverage through an employer's plan or a healthcare exchange will not be required to pay a penalty, nor will anyone who is currently enrolled in Medicare, Medicaid or a military healthcare plan. Those who have an expressed religious objection to traditional medicine, including members of Indian tribes, would also be excluded from the mandate. In addition, anyone for whom the tax would be an extreme hardship or for whom insurance would cost more than 8 percent of their household income would be considered exempt.

What is included in "minimum essential coverage?"

According the U.S. Secretary of Health and Human Services, the definition of minimum essential coverage can fall into one of four categories.

  • An eligible employer sponsored health plan

  • A state health insurance exchange

  • An approved government program such as Medicare, Medicaid or CHIP

  • A grandfathered plan

Some other types of coverage may also be deemed appropriate by HHS if it meets the standards for minimum essential coverage.

How much can one person be taxed if they opt out of an approved health plan?

Formerly known as a penalty, the annual "tax" for failing to obtain minimum essential coverage is as follows: the fee will be based on a percentage of the individual's taxable income. In 2014, when the mandate becomes law, the fee would be $95 for an individual with no dependents. In 2015 it will increase to $325 and in 2016 to $695. In 2017, the tax will be further revised in accordance with changes to the cost of living. The idea of increasing the penalty over several years is balanced by the expectation that the cost of healthcare coverage will go down as more people become insured.test

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