Reporting Individual Health Care Coverage to Prove Compliance with PPACA Individual Mandate

2014 was the first effective year for the “individual mandate” of the Patient Protection and Affordable Care Act (PPACA), which requires all Americans to maintain health insurance coverage unless they can claim an exemption. If an individual didn’t have health coverage for any month during 2014, he or she will be required to pay a penalty of the higher of 1 percent of yearly household income or $95 per family member ($47.50 per child under age 18). As we head into tax season, many people (including possibly some of your employees!) are wondering how they will report their coverage status to the government and how this penalty will be assessed.

For someone whose entire family had coverage for the entire 2014 calendar year, reporting coverage status will be as easy as checking a box on Form 1040. If any member of the family went without coverage for any month during 2014, but the employee is claiming an exemption from the penalty because they had a good reason for not having coverage, they will complete Form 8965. The available exemptions are listed in the instructions to Form 8965. If any member of the family went without coverage and does not qualify for any exemptions, the applicable penalty should be included on Line 61 in the “Other Taxes” section of Form 1040.

The requirement for employers to issue statements to employees detailing an offer of full-time insurance coverage is not effective until the 2015 calendar year. Accordingly, some employees may be wondering what documents to use to support their coverage status. They may be able to obtain confirmation of coverage from their insurance companies. Certain employees of larger companies (those who issue 250 W-2 forms or more) may also be able to use their W-2 forms, which are required to contain disclosures of the amount their employer spent on health care coverage, to support their coverage claim.