Jeffrey Wade
While the US federal government requires you to have minimum health coverage, there is no federal tax penalty for not having health insurance. However, certain states, including California, Massachusetts, New Jersey, and Rhode Island, will impose a fine on residents without health insurance. These state-level penalties vary, with some based on a flat rate per adult and child and others calculated as a percentage of household income. Therefore, it is important to understand the specific regulations and potential penalties in your state when considering alternatives to traditional insurance plans, such as AlohaCare, to avoid unexpected fines.
| Characteristics | Values |
|---|---|
| IRS penalty for not having health insurance | No longer imposed since 2019 |
| State-level penalty for not having health insurance | Applicable in California, Massachusetts, New Jersey, Rhode Island, Washington D.C., Maryland, and Vermont |
| Fine calculation methods | Monthly rate based on the number of uninsured members, 2.5% of income after deductions with number of household members considered, cost of a bronze health insurance plan multiplied by the number of months uninsured, income-based fines |
| AlohaCare | A health insurance plan available in Hawaii |
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What You'll Learn
Federal vs. state penalties for no insurance
Since 2019, there has been no federal penalty for not having health insurance. The Affordable Care Act (ACA), which included a federal mandate that required everyone to have health insurance or pay a penalty, was repealed that year. However, some states have their own mandates and penalties for not having health insurance, and these vary by state.
States with Penalties for No Insurance
As of 2025, the following states have penalties for not having health insurance:
- California: The penalty is either a flat amount based on the number of people in the household or 2.5% of gross income above the filing threshold, whichever is higher. For 2025, the minimum fine is around $900 per adult and $450 per dependent child.
- Massachusetts: The penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. For higher-income individuals, the penalty can be up to $1,908 per year.
- New Jersey: The penalty is $695 per adult or 2.5% of household income, with a maximum penalty of $3,012.
- Rhode Island: The penalty is the same as the old federal formula—2.5% of income or a flat fee.
- District of Columbia: The penalty is up to $2,000+ per household, depending on income and dependents.
Calculating State Penalties
Each state uses its own formula to calculate penalties for not having health insurance. Some states use a flat dollar amount, while others apply a percentage of income, and some use a combination of both. The amount of the penalty can depend on factors such as income, family size, and how long an individual was uninsured during the year.
Exemptions and Alternatives
In some states, individuals may qualify for an exemption from the penalty for not having health insurance. Additionally, there may be legal alternatives to traditional health insurance that can help individuals avoid the penalty.
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The individual mandate penalty
The Affordable Care Act (ACA), signed in 2010 by President Barack Obama, included an individual mandate requiring most Americans to purchase health insurance. This mandate was intended to prevent a downward spiral of increasing insurance premiums. Without it, healthier individuals would be incentivised to opt out of the system, reducing the pool of people paying into insurance plans and therefore causing premiums to rise. This, in turn, would further incentivise healthy people to opt out of insurance, and so on.
The individual mandate was among the least popular provisions of the ACA, and in 2017, Congress passed the Tax Cuts and Jobs Act, which eliminated the individual mandate penalty, effective January 1, 2019. This meant that while the mandate itself remained in place, there was no longer a financial penalty for not complying with it. The Congressional Budget Office (CBO) estimated that this would result in 3 million to 6 million fewer people enrolling in health insurance between 2019 and 2021, and a rise in premiums on the individual market by around 10%.
The CBO also concluded that repealing the mandate penalty would reduce federal expenditures over ten years by $318 billion. However, it is important to note that the mandate was upheld as a valid tax by the Supreme Court in 2012, and so the repeal of the penalty effectively removed any lingering authority of the mandate itself.
Following the repeal of the federal penalty, some states, including California, New Jersey, Massachusetts, Rhode Island, and the District of Columbia, passed their own legislation to penalize individuals for not having health insurance.
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Exemptions to the mandate
Since 2018, there has been no federal tax penalty for lacking health coverage in the US. However, certain states like California, DC, Massachusetts, New Jersey, and Rhode Island impose fees on residents who do not have health insurance. These fees can often be avoided by applying for exemptions.
There are two types of exemptions: affordability and hardship. Affordability exemptions apply if the lowest-priced coverage available to you would cost more than 7.97% of your household income. Hardship exemptions cover a wide range of circumstances, including:
- Financial hardship or other circumstances that prevented you from obtaining health insurance
- Homelessness
- Eviction or the threat of eviction or foreclosure
- Receiving a utility shut-off notice
- Domestic violence
- The death of a family member
- Fire, flood, or other natural or human-caused disasters that caused substantial property damage
- Bankruptcy
- Unaffordable medical expenses resulting in substantial debt
- Unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
- Claiming a child as a tax dependent who has been denied coverage for Medicaid or the Children's Health Insurance Program (CHIP), and another person is legally required to provide medical support for the child
Additionally, people who are ineligible for Medicaid solely due to their state's lack of expanded Medicaid coverage are granted a hardship exemption for the entire calendar year. Similarly, those eligible for Indian Health Services are exempt as long as they remain eligible for those services. For individuals under 21 who qualify for a religious conscience exemption, a new application is necessary after turning 21.
It is important to note that exemption processes vary by state, so it is recommended to visit the official website of your state for specific information and instructions on applying for exemptions.
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Impact of mandate removal
The federal individual mandate of the Affordable Care Act, which imposed a tax penalty on uninsured individuals, was repealed in 2019. This mandate was intended to increase insurance coverage and incentivize healthier people to enroll. However, it was criticized by some as an "assault on liberty". While there has been a limited empirical analysis of the mandate repeal's effects, simulation models predicted that the number of uninsured people would increase by 7 million between 2019 and 2029.
The repeal of the mandate was associated with a significant increase in the probability of being uninsured. In a sample of 214,821 lower-income, non-elderly adults, the repeal led to a 0.5% point or 24% increase in the likelihood of becoming uninsured. This suggests that financial incentives play a crucial role in insurance enrollment decisions.
Several factors influence consumers' responses to mandates, including non-financial considerations such as compliance with the law, beliefs about enforcement, and decision-making inertia. The elimination of the mandate penalty is estimated to result in a decline in enrollment by 2.8 million to 13 million people and an increase in premiums for bronze plans by 3% to 13%. The impact on the federal budget deficit is uncertain, ranging from a reduction of $8 billion to an increase of $3.6 billion in 2020.
While the individual mandate penalty has been repealed at the federal level, some states have implemented their own insurance mandates. For example, Massachusetts, New Jersey, and Washington, DC, have state-level mandates, while New York prohibited insurers from including a mandate surcharge in premiums. The impact of the mandate repeal is complex and varies depending on economic and non-economic factors, with some individuals responding more to financial incentives than others.
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Fines for uninsured in different states
While the IRS does not penalize people for not having health insurance, some states impose a fee on residents who do not have health insurance. These states include California, Massachusetts, New Jersey, Rhode Island, and Washington, D.C. The penalty for being uninsured varies among these states. For example, in Massachusetts, the penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. In Washington, D.C., the penalty amounts are based on the previous federal penalty rates, which were a flat rate of $695 per adult, half of that for a child, or 2.5% of income, whichever is higher.
When it comes to driving without insurance, all 50 states consider it illegal, but the penalties differ. In Texas, a first offense can result in a fine of $175 to $350, an annual surcharge of $250 for three years, and the requirement to file an SR-22 form to prove future coverage. Second and subsequent violations can lead to fines up to $1,000, suspension of driving licenses and vehicle registration, vehicle impoundment, and higher insurance rates. In other states, uninsured driving offenses can also trigger thousands of dollars in fines, fees, surcharges, and legal costs. Additionally, insurers will classify uninsured drivers as "high-risk," leading to limited options and higher insurance prices.
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Frequently asked questions
The IRS no longer imposes a federal tax penalty for not having health insurance. However, you may face a fine at the state level if you are uninsured and live in California, Massachusetts, New Jersey, Rhode Island, Vermont, or Washington, D.C.
The penalty for not having health insurance varies by state and can be calculated in different ways. In New Jersey, individuals without health insurance will have to pay a penalty not exceeding the average cost of a bronze plan, based on their household size and income. In Rhode Island, the penalty is calculated by comparing three methods: applying a monthly rate to the number of uninsured individuals, considering 2.5% of one's income, and the cost of a bronze health insurance plan multiplied by the number of months uninsured; the lowest amount from these methods is the final penalty. In Washington, D.C., residents must pay a fine of either $695 per adult and $347.50 per child, or 2.5% of the household's income, whichever is higher.
The individual mandate, also known as the individual shared responsibility penalty, required almost all Americans to maintain health insurance coverage unless eligible for an exemption. While the mandate still exists, there is no longer a federal penalty for non-compliance.
Some alternatives to private health insurance include government-funded programs such as Medicare and Medicaid. These programs provide health coverage for eligible individuals based on age, income, and other factors. Additionally, some states offer their own health insurance plans or have specific requirements and subsidies to make coverage more accessible and affordable.
