With the newly created healthcare bill just passed by Congress, many people will be affected both directly and indirectly. This legislation is large and very complex but one section in particular, the health insurance mandate, has caused some confusion among people that do not currently have health insurance. Exactly how mandates work varies but this part of the healthcare bill mandates that anyone who does not currently have health insurance must do so or face a fine.

The new health insurance mandate is not meant to affect people that currently have health insurance coverage. However, it is debated that their premiums will increase to help cover the costs of new policy holders. Under the new law, if you do not currently have coverage, you must purchase some type of health insurance plan by the year 2014. To be more specific, everyone must have coverage. If a family of four, for example, has no coverage, everyone must have some type of health insurance by the deadline. One person getting coverage does not satisfy the requirement for the other three. Failure to establish health insurance coverage, based on how mandates work such as this one, by the deadline will result in an annual penalty. In the year 2014, the penalty is a nominal $95 or 1% of your annual income. This penalty applies per person. However, increases in the penalty to $695 per year or 2.5% of income, starting in 2016, make this penalty a serious issue. The best news regarding the health insurance mandate is that coverage must be offered to everyone. Coverage denied because of pre-existing conditions will no longer be an issue.

There are two exceptions to the health insurance mandate. First, if someone is below the poverty level, they can opt out of this mandate. Second, if the cheapest health insurance policy costs more than 8% of your annual income, you can again opt out of the law. For example, if your annual salary is $20,000 an a yearly policy costs over $1,600 then you are exempt from this mandate. However, it is anticipated that cheaper group policies will be created that lower income people can purchase and participate in.

Even though this new law is meant to place everyone under some type of health insurance umbrella, some people will weigh the cheaper of a penalty or insurance. Even at the steepest, the penalty could be a less expensive route for a particular segment of the population. Individuals and especially families will have to consider what policy works best for them financially and begin to prepare for the coming deadline. Employers may also consider adding some type of coverage for employees not currently participating.