Aug. 27—The IRS issued final rules Tuesday implementing the individual health insurance mandate.

The Affordable Care Act required most Americans to obtain qualifying health insurance coverage or face a tax penalty, which the IRS will begin enforcing as a “shared responsibility payment” for the 2014 tax year.

The penalty for lacking health insurance is the greater of $95 or 1 percent of household income in the first year. The tax penalty increases to the greater of $695 per person or 2.5 percent of household income by 2016. In subsequent years, the penalty rises according to a cost of living formula. People paying the penalty are expected to rise from 2 million in 2015 to 6 million in 2021, according to May projections from the Congressional Budget Office.

Among the people exempted from the penalty are residents of states that opted not to expand their Medicaid eligibility—as urged by the Affordable Care Act—and with incomes of up to 100 percent of the federal poverty level. Other Americans can avoid the penalty if they oppose insurance coverage for religious reasons or are members of Indian tribes. 

The controversial individual mandate was the focus of the landmark 2012 Supreme Court ruling upholding the law.

Supporters of the law say the mandate is key to the law’s functioning. Without the penalty, millions of young healthy adults may not enroll in the coming health insurance marketplaces and endanger the solvency of insurance plans sold there.

Critics of the law have called for a delay in the mandate. The House of Representatives voted for a one-year delay in July, but the Senate is not expected to take up the bill.

Publication Date: Tuesday, August 27, 2013