As Congress struggles to figure out what to do about the Affordable Care Act (ACA), sometimes called Obamacare, there’s a new plan to eliminate at least one piece: the shared individual responsibility payment sometimes called the individual mandate or the health care penalty.
Under the ACA, you’re required to demonstrate that you have “essential minimum coverage.” You’re considered covered if you have insurance through the government, including Medicare, Medicaid, CHIP, retiree coverage, TRICARE, or VA health coverage; private insurance that you purchased on your own including COBRA coverage and coverage obtained through the Health Insurance Marketplace; or provided by your employer (even if you didn’t pay anything for the coverage). Most taxpayers – about 130 million or so – will report coverage. Those that don’t have coverage must claim a waiver or exemption (typically based on hardship) or be subject to a penalty. The amount is figured and reported on your tax return, with any outstanding amount due by Tax Day.
The penalty was intended to be a financial disincentive to remain uninsured if you could otherwise afford insurance. It was an important part of the effort to keep premiums down: the more healthy people that buy insurance, the argument goes, the less expensive premiums would be overall. If, on the other hand, folks could avoid buying coverage until they got sick, premiums would be more expensive for everyone. In that way, the penalty acted as the financial glue that held Obamacare together.
As you can imagine, however, the provision wasn’t popular for those who didn’t want to buy coverage. Congress couldn’t, however, think of a way to get rid of it outside of repealing Obamacare – until now.
The House Appropriations Committee’s Financial Services and General Government Subcommittee has passed an appropriations bill for the upcoming fiscal year (the government’s fiscal year begins on October 1) which would tackle the issue. The specific language from the bill (downloads as a pdf), authored by Rep. Tom Graves (R-GA), says:

None of the funds made available by this Act may be used by the Internal Revenue Service to implement or enforce section 5000A of the Internal Revenue Code of 1986, section 6055 of such Code, section 1502(c)24 of the Patient Protection and Affordable Care Act (Public Law 111-148), or any amendments made by section 1502(b) of such Act.


Except to the extent provided in section 6014, 6020, or 6201(d) of the Internal Revenue Code of 1986, no funds in this or any other Act shall be available to the Secretary of the Treasury to provide to any person a proposed final return or statement for use by such person to satisfy a filing or reporting requirement under such Code.

I’ll save you the clicking around to figure out those sections: the bill would bar the IRS from using money from the budget to enforce the mandate. Additionally, the bill would prohibit the IRS from requiring employers and insurance companies to report health insurance coverage provided to employees – those information returns (the 1095 forms series) that IRS uses to data match for enforcement purposes.
In other words, the appropriations bill, as currently written, would gut the mandate. It would be an official death sentence for what had might already be a dying provision. In January, President Trump signed an executive order giving federal agencies the authority and discretion to roll back certain aspects of the Affordable Care Act (ACA). The following month, the Internal Revenue Service appeared to be easing off of enforcing the mandate.
How many people would actually be affected? In January, IRS Commissioner John Koskinen had reported to Congress that only a small number of taxpayers are responsible for making the payment: 80% of taxpayers indicated on their returns that they had qualifying coverage all year and about 9% of taxpayers claimed one or more health care coverage exemptions. That leaves about 11% of taxpayers – or somewhere around 16 million – subject to the penalty. That’s consistent with numbers from the Congressional Budget Office (CBO): last month, the CBO reported that repealing the individual mandate penalty would result in 15 million fewer Americans having health insurance next year.
So, an official action to stop the mandate would be a big deal – or would it? Here’s what neither side of the aisle will tell you: There are practically no real consequences for not paying the penalty. By law, you have to pay the penalty. But if you don’t, you won’t go to jail, you won’t be liened, and you won’t be levied for collection (all of those options were specifically banned in the original law). Of course, you could have your tax refund seized. And you might get a nasty letter and a virtual shaking of the government’s fist at you. But that’s about it. The existing law doesn’t have a lot of teeth for enforcement – but if the current bill goes through, it will be completely toothless.

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Kelly Erb is a tax attorney, tax writer and podcaster.

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