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ACA mandate penalties still apply, IRS confirms

Published on August 15th, 2017 by Triton Benefits & HR Solutions

One of President Donald Trump's first actions following his inauguration was to issue an executive order regarding the Affordable Care Act. The order instructed the heads of all executive agencies and departments to "waive, defer, grant exemptions from, or delay the implementation of" any ACA requirement that could create a financial burden on states, individuals or health care organizations.

Because of the order's imprecise wording, tax payers and health care providers alike were confused as to which ACA-related mandates were still required and which were not. Many speculated the employer shared responsibility rules, also known as the employer mandate, and the individual mandate would no longer be enforced. 

A woman and a man in a business setting conversing over documents.The president's executive order led to confusion about the individual and employer mandates.

A summary of the individual and employer mandates

The employer mandate requires applicable large employers – those with at least 50 full-time or full-time equivalent employees – to provide minimum value health coverage to their staff and their staff's dependents. If the ALE did not provide coverage or the plans offered were unaffordable or did not provide minimum value, the organization would be fined a penalty by the IRS.

Similarly, the individual mandate required most people to obtain acceptable coverage for themselves and their families. Failing to do so resulted in a tax penalty for every uncovered family member. While there were certain exemptions for both mandates, the majority of ALEs and individuals were legally required to provide or obtain health insurance. 

Penalties still in effect, said IRS

Because the executive order was issued to reduce financial burden, many suspected the mandate penalties would no longer be in effect. Theoretically, businesses would no longer be required to provide insurance, and individuals would no longer have to seek coverage. According to the IRS, however, the original ACA law still stands. The Office of Chief Counsel issued a series of information letters explaining that only Congress, and not a president's executive order, can change the law. Unless Congress passes a bill altering the ACA, taxpayers are still required to follow it as written. 

"The Executive Order does not change the law; the legislative provisions of the ACA are still in force until changed by the Congress, and taxpayers remain required to follow the law, including the requirement to have minimum essential coverage for each month, qualify for a coverage exemption for the month, or make a shared responsibility payment," one of the letters read. 

What is the future of the ACA?

Currently, the future of the ACA is unclear. After the defeat of the 'skinny repeal' bill at the beginning of August, members of the House and Senate announced they were prepared to take a bipartisan approach to healthcare reform. Meanwhile, the Trump Administration is continuing its pursuit on repealing and replacing the Affordable Care Act. Recently, the administration suspended contracts supporting insurance enrollment fairs and public library sign-ups in 18 cities, The Washington Post reported.

Still, despite the uncertainty, tax payers should assume the ACA stands as is until Congress passes new health care legislation.

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