Orlando Harmon
Health insurance is not mandatory at the federal level for adults in the United States. However, certain states have implemented their own health insurance mandates, with penalties for residents who don't comply. The federal individual mandate penalty was eliminated at the end of 2018 under the Tax Cuts and Jobs Act of 2017, but states still have the option to enforce their own penalties. For example, California enacted legislation in 2019 that created an individual mandate with a penalty for non-compliance, and Rhode Island implemented a similar mandate in the same year. While health insurance may not be legally required in all states, going without coverage is not recommended as it leaves individuals vulnerable to high medical costs in the event of illness or injury.
| Characteristics | Values |
|---|---|
| Federal penalty for not having health insurance | Eliminated in 2018 |
| States with individual mandates and penalties | California, Rhode Island, Vermont, Massachusetts, New Jersey, Washington D.C. |
| States with individual mandates, no penalty | Maryland |
| States with easy enrollment programs | Maryland, Several others |
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What You'll Learn
Federal mandate penalty was removed in 2018
The Affordable Care Act (ACA) previously included a federal mandate that required most Americans to enroll in health insurance. This was known as the "Shared Responsibility Payment" or simply "the mandate". If individuals did not comply with this mandate, they would be required to pay a tax penalty, also known as the individual mandate penalty.
In December 2017, Congress passed the Tax Cuts and Jobs Act, which eliminated the individual mandate penalty, effective from January 1, 2019. This meant that from 2019 onwards, individuals who were uninsured would no longer be penalized by the federal government.
The individual mandate was among the least popular provisions of the ACA. The Congressional Budget Office (CBO) estimated that eliminating the penalty would result in a reduction of 3 million to 6 million health insurance enrollees between 2019 and 2021. Despite this, some states have implemented their own health coverage requirements, with penalties for residents who do not comply. For example, California, Rhode Island, Vermont, Massachusetts, New Jersey, and the District of Columbia have all enacted legislation to create individual mandates with penalties.
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Some states have their own penalties
While health insurance is not mandatory at the federal level for adults, and the federal individual mandate penalty was eliminated at the end of 2018, some states have implemented their own health coverage requirements, with penalties for residents who don't maintain coverage.
These state-level individual mandates require residents to have health insurance or face a penalty, with the aim of increasing the number of people with health insurance coverage to promote better access to healthcare services and reduce the burden on the healthcare system. The specifics of state mandates and penalties vary, so it is essential to check with your state's health insurance department to understand the rules and potential consequences in your area.
For example, California enacted legislation in 2019 that created an individual mandate starting in 2020, with a penalty for non-compliance. California uses revenue from this program to offer additional state-funded health insurance subsidies. Rhode Island also implemented an individual mandate effective in 2020, with a penalty for non-compliance, and the revenue generated from the penalty is used to fund the state's reinsurance program.
Massachusetts has had an individual mandate and penalty in effect since 2006, and while people who were uninsured in Massachusetts between 2014 and 2018 didn't have to pay both state and federal penalties, they now only need to pay the state's penalty since the federal penalty no longer applies. Vermont enacted legislation in 2018 to create a state-based individual mandate, but the penalty language was ultimately stripped out of the legislation and the final version did not include any penalties.
Maryland also considered an individual mandate and penalty in 2019, but that portion of the bill was removed before passage, and the final version instead created an "easy enrollment health insurance program" that uses tax return data to identify uninsured individuals and connect them with the Maryland health insurance exchange.
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California and Rhode Island have penalties
As of 2018, there is no longer a federal tax penalty for not having health insurance. However, certain states have since created mandates to reinstate penalties for uninsured residents. California and Rhode Island are among the few states that have added tax penalties for individuals and households without health insurance.
In California, residents are required to have health insurance or face a tax penalty. This mandate went into effect in the 2020 tax year, and Californians without health insurance have been facing tax penalties since then. During the 2022 tax season, over 271,000 households paid fines for lacking health insurance, with an average penalty of $1,149 per household. In the 2024 tax season, these penalties rose to up to $850 per adult and $425 per child. It is important to note that California offers health insurance for as little as $10 per month, and many of those paying fines are eligible for subsidized health plans through Covered California. Lower-income households bear the brunt of these penalties, with about 60% of those fined earning $50,000 or less.
Rhode Island also has a health insurance mandate, requiring all non-exempt residents to have qualifying health coverage. This mandate went into effect on January 1, 2020. Failure to maintain continuous health coverage throughout the year may result in a state personal income tax penalty when filing taxes. Rhode Islanders can obtain qualifying health coverage through their employer, directly from a health insurance carrier, Medicare, Medicaid, or a health plan purchased through HealthSource RI, the state's health insurance marketplace. HealthSource RI offers affordable health coverage based on factors such as expected income, household size, and access to health coverage through an employer.
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Exemptions from the fee for no health insurance
The fee for not having health insurance, sometimes called the "Shared Responsibility Payment" or "mandate", ended in 2018. This means that in most states, you no longer pay a tax penalty for not having health coverage, and you don't need an exemption to avoid paying a penalty. However, some states have implemented their own health coverage requirements with penalties for non-compliance. These include:
- California: In 2019, California enacted legislation that created an individual mandate with a penalty for non-compliance. The penalty for not having coverage for the entire year will be at least $900 per adult and $450 per dependent child under 18.
- Rhode Island: Rhode Island implemented an individual mandate with a penalty for non-compliance, effective in 2020. The revenue generated from the penalty is used to fund the state's reinsurance program.
- Vermont: Vermont enacted legislation in 2018 to create a state-based individual mandate, but the penalty details were not included and were left for lawmakers to work out in the 2019 session. However, the penalty language was ultimately stripped from the legislation, and the version that passed did not include any penalties.
- Maryland: In 2019, Maryland enacted HB814/SB802, which initially included an individual mandate and penalty that would have taken effect in 2021. However, that portion of the bill was removed before passage, and the final version created an "easy enrollment health insurance program" instead.
These states have their own exemption processes, and you can visit their websites to apply for an exemption:
- California: Covered California
- District of Columbia: DC Health Link
- Maryland: Maryland Health Connection
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Financial consequences of no health insurance
Since 2019, Americans without health insurance have not been taxed by the government. The ACA's federal tax penalty for not having minimum essential coverage was eliminated at the end of 2018 under the Tax Cuts and Jobs Act of 2017. However, some states have implemented their own health coverage requirements, with penalties for residents who don't maintain coverage. For example, California enacted legislation in 2019 that created an individual mandate with a penalty for non-compliance.
While there may not be a tax penalty for being uninsured, there are still significant financial consequences. Uninsured adults are more likely to face negative consequences due to healthcare debt. They are more likely to use up their savings, have difficulty paying other living expenses, or borrow money. Uninsured adults are also less likely to access care and more likely to delay or forgo it altogether because of concerns over costs. The consequences can be severe, particularly when dealing with preventable or chronic conditions.
The average daily cost of hospital treatment in the US exceeds $2,000, with the average hospital stay being 4.6 days, totalling $13,262. If surgery is involved, the costs for the most common procedures can surpass $100,000. As a result, medical debt is the most common type of third-party collection on consumers' credit reports, and the most frequent type of debt that consumers are contacted about by debt collectors.
In addition to the financial burden, uninsured adults have less access to recommended care, receive poorer quality of care, and experience worse health outcomes than insured adults. They are also more likely to postpone or forgo health care due to the cost, which can lead to further health complications and financial strain.
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Frequently asked questions
Health insurance is not mandatory at the federal level for adults. The federal individual mandate penalty was eliminated at the end of 2018. However, some states have implemented their own health coverage requirements, with penalties for residents who don't maintain coverage.
Some states with individual mandates include California, Rhode Island, Vermont, New Jersey, Massachusetts, and Washington D.C.
The penalties for not having health insurance vary by state. For example, California has an "Individual Shared Responsibility Penalty", where you pay a penalty when you file your state tax return if you don't have minimum essential coverage. In 2024, this penalty is $900 per adult and $450 per child.
Beyond potential penalties, not having health insurance can lead to significant financial consequences if you experience an unexpected illness or injury. Medical bills can be overwhelming without the protection of insurance.
