I've written this in reference to Michael Collins's diary post One More Reason to Kill this Bill and some of the confusion over sections and what is in the bill as far as coverage requirements and penalties.

I'm looking here (.pdf file) for the new Health bill and somewhere around here for the IRS Tax Code. Will post more precise links (possibly to other sources) as needed.

1) HR3962 Sec. 501 (p. 297) If you fail to purchase insurance you will pay 2.5% of (modified adjusted gross income - gross income) but, if that value is higher than the “average premium for self-only coverage under a basic plan which is offered in a Health Insurance Exchange…” you will pay that average premium instead. So, there is a cap on the 2.5%, set at the average premium of a plan on the exchange. Not sure how high that average will be. HR3962 Sec. 501 (p.298) This amount is pro-rated based upon the fraction of the year that you go without coverage.

Note that a “basic plan” is outlined in HR3962 Section 303(c) on page 168.

Modified Adjusted Gross Income is defined as adjusted gross income increased by (A) any amount excluded from gross income under section 911 of IRS Code (see the link below) and (B) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

2) HR3962 Sec 501 (p.299). For Americans living overseas, you are exempt from paying this tax if you have been living abroad and are a resident of a foreign country for at least one taxable year. Relevant IRS code is here (scroll down a bit to sec. 911(d)(1)). I assume the prorating would apply if you’ve only been living overseas for less than a year.

3) You can apparently file an exemption from the requirement to purchase insurance based upon religious beliefs, though you must document your adherence to a faith that would want this. There’s a bit more in there, starting on HR3962 Sec. 501, pages 299-300.

4) HR3962 Sec 501, p. 304. Seems to state that small lapses in coverage are not going to result in taxes. I would assume this means a few days, but I don’t see any specific numbers. The bill just calls them “de minimis lapses of acceptable coverage.”

Now, if you don’t pay the tax in point (1) above then you will be subject to normal IRS rules and regulations. I would assume this is where IRS Code sections 7201 and 7203(see links below) come in. They feature up to $25,000 in fines and no more than 1 or 5 years in jail (depending on which is applicable). I’m not sure how these are applied in practice.

So, it looks like no specific penalties are outlined in the bill, but the 2.5% is designed as a tax and so would fall under IRS rules for non-compliance.

IRS Code Section 7201
IRS Code Section 7203