Requirement to Have Health Insurance









On August 27, 2013, the IRS issued final regulations on the requirement contained in

the Health Care Reform Act of 2010 that all non-exempt U.S. citizens and legal residents
maintain minimum essential health insurance coverage. Beginning with the 2014 tax
year, individuals who do not maintain minimum essential coverage will be subject to
a penalty on their individual income tax return, unless they meet one of the exceptions
to the penalty. The following information summarizes the final regulations and clarifies
rules contained in IRC section 5000A.

Filing requirement threshold. Under the law, a taxpayer is exempt from the require-
ment to maintain minimum essential coverage if income is below the applicable filing
requirement to file a tax return. The final regulations clarify that if the taxpayer is not re-
quired to file a tax return due to being below the filing threshold, then the taxpayer is not
required to file a return for purposes of claiming the exemption from the requirement
to maintain minimum essential coverage. If the taxpayer does in fact file a return (even
though not required to), then there will be a procedure on the filed return that allows the
taxpayer to claim the exemption from the requirement to maintain minimum essential

The final regulations also clarify that if a taxpayer claims a dependent on the tax return,
the filing requirement threshold exemption applies to the taxpayer who claims the ex-
emption deduction for the dependent.

Coverage for a month. Under the law, an individual is required to maintain minimum
essential coverage for each month beginning after 2013. Proposed regulations issued on
February 1, 2013 interpreted this to mean an individual has minimum essential coverage
for a particular calendar month if the individual is enrolled in and entitled to receive
benefits under a plan for at least one day during the month (the one-day rule). Some in-
terpreted the law to mean an individual was considered covered if he or she was enrolled
in a plan for the majority of days during a month. However, the final regulations adopt
the one-day rule from the proposed regulations.

Medicaid coverage. Medicaid coverage qualifies as minimum essential coverage under
the law. The final regulations say that if an individual has submitted an application for
Medicaid but is awaiting approval for enrollment, the individual will be considered to
have minimum essential coverage only if the individual is eventually granted Medicaid
coverage, since Medicaid is generally granted retroactively to the date the application is
filed. If the application is eventually denied, the applicant will not be considered to have
minimum essential coverage during the months the application was being processed.

Pregnancy-related Medicaid. States have the option to extend Medicaid coverage to
pregnant women whose income and/or assets would otherwise not qualify them for
Medicaid. Pregnant women receive care related to the pregnancy, labor, and delivery and
any complications that may occur during pregnancy, as well as perinatal care for 60 days
postpartum. The final regulations clarify that pregnancy-related Medicaid is not in itself
minimum essential coverage. Some states may choose to provide pregnant women with
full Medicaid coverage (in which case it would qualify as minimum essential coverage),
but if a state does not, the coverage for pregnancy related expenses only, is not consid-
ered minimum essential coverage.

Medicaid premium assistance programs. Certain individuals may be eligible to re-
ceive full Medicaid benefits under a Medicaid premium assistance program. These pro-
grams help Medicaid-eligible individuals to enroll in employer-sponsored coverage if
it is cost-effective for the state to do so. States exercising this option must also provide
“wrap around” coverage to ensure covered individuals receive the same benefits that
are provided under the state’s Medicaid program for individuals not covered under an
employer-sponsored plan. States also have the authority to create similar premium as-
sistance programs for individuals enrolled in private coverage in the individual market.
States also have the authority to provide Medicaid to disabled children without regard to
the income of the child’s parents. In some cases, the child may have private health insur-
ance in addition to the Medicaid coverage, in which case Medicaid becomes the second-
ary payer covering costs that private insurance does not cover. In effect, the child receives
full Medicaid benefits through the combination of private insurance and Medicaid. The
final regulations clarify that all of these types of programs qualify as minimum essential

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