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How does the mandate in Obamacare work, anyway?

Consumer Reports News: March 27, 2012 04:26 PM

Today a reportedly skeptical Supreme Court heard oral arguments about the most contentious and least popular aspect of the Affordable Care Act--the individual mandate.

We won't know the fate of the mandate until the court issues its decision later this year, but today seems like a good time to review exactly what it is and how it works. And also to point out that the great majority of people demonstrating against the mandate in front of the Supreme Court would likely never be affected by it.

As most people know by now, starting on Jan. 1, 2014, every American will have to have health insurance or pay a penalty. It will start at $285 per family or 1 percent of income, whichever is greater, in 2014 and rise to $695 or 2.5 percent of income in 2016 and beyond. It will be paid via your tax return, but the law specifically rules out pretty much any meaningful enforcement, such as a tax lien or criminal penalty, for not paying it. The Washington Post's Wonkblog has a useful primer with much more detail on this (including why Congress put the mandate in the law in the first place).

In addition, the mandate will likely affect only about 7.3 million people, according to a new analysis by the Urban Institute, a Washington think tank, because of the many ways people can get an exemption from the penalty.

First off, everyone on public programs like Medicare, Medicaid, and CHIP is exempt. So are people in the military or covered by the VA as well as members of recognized Indian tribes, Americans abroad, prison inmates, and anyone in the country illegally. Also, subtract everyone who has any kind of group health insurance, already has good individual insurance, is a member of a health-care sharing ministry, or belongs to a religion opposed to health insurance. Then, everyone whose income is so low they don't have to file an income tax return. And those who will be able to obtain insurance at little or no cost because of the law's subsidies and expansion of Medicaid. Finally, subtract those who would have to spend more than 8 percent of their family income on the cheapest qualifying health plan; they're exempt because of financial hardship.

And, voila, you're left with 7.3 million who will have to pay a fine--except no one will be forcing them to do so.

Got a question for me? Ask it here.

Nancy Metcalf

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