How does the government collect the penalty for not obtaining insurance?

Penalty payments may be deducted from any tax refunds.

Are individuals exempt from the individual mandate if their required contribution for coverage for the month exceeds 8% or 9.5% of their household income?

There are two different affordability percentages – 8% and 9.5% (indexed annually).  These percentages are used for different purposes.

9.5% of household income is used to determine affordability for purposes of the large employer mandate (there are safe harbors employers can use instead of household income) and eligibility for premium tax credits and cost-sharing reductions on the Exchange.

8% of household income is used to determine affordability for purposes of the individual mandate.  Individuals who cannot afford coverage, meaning the individual’s required contribution for coverage for the month exceeds 8% of the individual’s household income, are exempt from the individual mandate and thus will not be subject to the penalty.

What constitutes a federally recognized American Indian?

A federally recognized American Indian are members as well as first or second descendants of tribe members of federally-recognized tribes by the United States Bureau of Indian Affairs (BIA) in the U.S. Department of the Interior.

See http://www.gpo.gov/fdsys/pkg/FR-2013-05-06/pdf/2013-10649.pdf#page=1

If an individual buys insurance for less than the full year, e.g. only 3 months out of the 12 months, will the individual be subject to the individual mandate penalty?

The individual will be subject to a penalty for each month the individual does not maintain minimum essential coverage.  However, individuals are exempt from the penalty for short coverage gaps, which is a continuous period of less than 3 months.

If an individual does not have coverage for a continuous period that begins in one taxable/calendar year and ends in the next, for purposes of applying the short coverage gap rules to the first taxable/calendar year, the months in the second taxable/calendar year are not counted.  For purposes of applying the short coverage gap rules to the second year, the months in the first taxable/calendar year are counted.  For example, if the individual lacked coverage from November 1, 2015 until the end of February 2016, November and December of 2015 are treated as a short coverage gap on the 2015 tax return and thus exempt from penalty.  On the 2016 return, however, November and December of 2015 are included in the continuous period that includes January and February 2016. That continuous period is not less than 3 months so, on the 2016 return, January and February of 2016 are not exempt months under the short coverage gap exemption and therefore the individual would be subject to penalty for January and February of 2016.

Does an adult who is not working and does not file taxes exempt from the requirement to have health insurance? Will the person have to pay the penalty when he/she decides to purchase the health insurance later on?

Individuals who cannot afford coverage, meaning the individual’s required contribution for coverage for the month exceeds 8% of the individual’s household income; as well as taxpayers with income below the filing threshold are exempt from the individual mandate and thus will not be subject to the penalty.

Is foreign health coverage minimum essential coverage if a student plan/policy based in another country is more than emergency care?

According to the regulations, coverage or a plan provided by an issuer that is not offered within the 50 states and the District of Columbia is neither an eligible employer-sponsored plan nor a plan in the individual market.  Accordingly, it is not minimum essential coverage.  However, the Health and Human Services regulations provide a process by which a sponsor of a health plan, whether domestic or foreign, may apply for recognition as minimum essential coverage.

What is the tax penalty if an individual does not have health insurance? Is the penalty amount per month or per year?

The annual penalty amount is either a percentage of household income in excess of the return filing threshold or a flat dollar amount, whichever is greater.

Annual Penalty Amount for 2016

Flat dollar amount               

$695 per adult

$347.50 per child

Family maximum: $2,085

Note:  After year 2016, the flat dollar amounts are based on the 2016 amounts plus an inflation adjustment.

Percentage amount              

2.5% of household income above filing threshold

Household Income:  The modified adjusted gross income of you, your spouse (if filing jointly), and any dependents who are required to file a tax return.  Modified adjusted gross income is the adjusted gross income from the tax return plus any excludible foreign earned income and tax-exempt interest received during the taxable year.

Filing Threshold: The minimum amount of gross income an individual of your age and with your filing status (e.g., single, married filing jointly, head of household) must make to be required to file a tax return.

The penalty amount is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace. For 2015, the annual national average premium for a bronze level health plan available through the Marketplace is $2,484 per year ($207 per month) for an individual and $12,240 per year ($1,020 per month) for a family with five or more members.

The penalty is for each month of noncompliance, however, the amounts indicated are per year. Hence, if an individual had coverage or an exemption for part of the year, the penalty amount is divided by 12 to get the monthly penalty amount.