United States: IRS Issues Final Regulations On Individual Mandate To Maintain Healthcare Coverage

Last Updated: September 4 2013
Article by Robert B. Wynne and Larry R. Goldstein

This is the 38th in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the Act). In this article, we discuss the final regulations (Regulations) issued earlier this week by the Internal Revenue Service (IRS) addressing the Act's requirement for individuals to maintain minimum essential healthcare coverage or pay a penalty (Individual Mandate) beginning in 2014.


Under Section 5000A of the Internal Revenue Code (Code), an "applicable individual" must either maintain "minimum essential coverage" (MEC) for himself or herself and any nonexempt family members or include an additional payment with his or her federal income tax return. Section 5000A has been described as the linchpin of the Act. The decision of the U.S. Supreme Court in National Federation of Independent Business v. Sebelius, 2012 U.S. LEXIS 4876 (2012), upholding the constitutionality of Section 5000A under Congress' taxing power, enabled healthcare reform under the Act to proceed.

The IRS issued proposed regulations (Proposal) under Section 5000A last February. The Proposal was the first significant guidance from the IRS as to the Individual Mandate.

In an earlier WorkCite article, we discussed the provisions of the Proposal as to who is covered by the Individual Mandate, what individuals must do to comply and how liability is calculated if an individual failed to maintain MEC.

The Regulation includes most of the provisions in the Proposal and clarifies certain healthcare coverage options that qualify as MEC and elaborates on several of the exemptions from the Individual Mandate. The preamble to the Regulation addresses future IRS guidance to be issued.

Healthcare Coverage Options Qualifying as MEC

Several provisions of the Regulation or its preamble clarify the Proposal's broad definition of what constitutes MEC. The following qualify as MEC under the Regulation:

  • Self-insured group health plans: A self-insured group health plan qualifies as an eligible employer-sponsored plan.
  • Nonappropriated Fund Health Benefits Program: Although the Proposal generally provided that a governmental-sponsored program was not an eligible employer-sponsored plan, the Regulation acknowledges the existence of certain individuals who are eligible for MEC under government-sponsored plans by reason of employment with the U.S. Government, including the Department of Defense's Nonappropriated Fund Health Benefits Program.
  • Exchange-provided qualified health plans: Qualified health plans offered through the health insurance exchanges being established under the Act are "plans in the individual market" for purposes of qualifying as MEC.
  • Exchange-provided qualified health plans offered in U.S. territories: The Act provides that a U.S. territory electing to establish a health insurance exchange is treated as a state for applying basic regulations under the Act. The Regulation clarifies that a qualified health plan offered through an exchange established by and within a U.S. territory is treated as a "plan in the individual market" within a state.
  • Medicaid benefits suspended while incarcerated: An individual incarcerated pending disposition of charges whose Medicaid benefits have been suspended.
  • Medicaid premium assistance programs: Coverage under a Medicaid premium assistance program for certain individuals.
  • Plans offered on behalf of employers: Plans offered to employees on behalf of employers (such as multiemployer plans or single-employer collectively-bargained plans)

Exemptions for Certain Applicable Individuals

The Regulation or its preamble clarify several of the exemptions from the Individual Mandate for certain applicable individuals.

  • Additional hardship exemptions: Applicable individuals may claim hardship exemptions under the following two scenarios:

    • A taxpayer is not required to file an income tax return because his or her gross income is below the applicable return filing threshold, but the taxpayer files a return nevertheless, claiming a dependent (who has a filing requirement) and, as a result, had household income exceeding the applicable filing threshold.
    • Employed family members who are eligible for affordable employer-sponsored self-only coverage, but for whom the aggregate cost of employer-sponsored coverage for all employed members of the family is unaffordable.
  • Unaffordable coverage exemption for retirees: For purposes of the unaffordable coverage exemption from the Individual Mandate (which is available for individuals who cannot afford coverage because the premium cost is greater than 8 percent of household income), one is not considered eligible for retiree coverage unless he or she enrolls. This means that an individual who is eligible for retiree coverage but does not enroll disregards that eligibility in determining his or her qualification for the unaffordable coverage exemption.
  • Short coverage gap: Gaps in coverage prior to Jan. 1, 2014 are not taken into account when measuring the length of a coverage gap in 2014.

Anticipated Future Guidance

The IRS anticipates issuing guidance that will provide individuals an exemption from the Individual Mandate penalties for any month in which they are covered by any of the following types of coverage in 2014 (which currently do not qualify as MEC under the Regulation):

  • Pregnancy-related Medicaid coverage
  • Coverage under a limited-benefit TRICARE program for active and retired military personnel and their dependents
  • Certain coverage under certain demonstration projects under Section 1115 of the Social Security Act authorized by the Department of Health and Human Services to test new or existing approaches to financing and delivering Medicaid

Additional future IRS guidance will address the following:

  • Other government-sponsored plans qualifying for MEC as eligible employer-sponsored plans
  • Arrangements in which an employer provides subsidies or funds a pre-tax arrangement for employees to use to obtain coverage under plans offered in the individual market
  • Whether Medicaid coverage provided to medically-needy individuals is MEC
  • How individuals may claim the exemption for being not lawfully present in the U.S.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.