Jane Dotson
The penalty for not having medical insurance varies depending on where you live. In the US, the federal individual mandate penalty was scrapped at the end of 2018, but some states have implemented their own health coverage requirements, with penalties for non-compliance. These include California, Rhode Island, New Jersey, Massachusetts, and DC. The penalty amount varies per state, with California charging $900 per adult and $450 per dependent child under 18, while in Rhode Island, the penalty is 2.5% of the amount of gross income that exceeds the filing threshold. While Maryland initially considered an individual mandate and penalty, the final legislation did not include any mandate or penalty language.
| Characteristics | Values |
|---|---|
| Federal penalty for not having health insurance | Eliminated at the end of 2018 |
| States with penalties for not having health insurance | California, New Jersey, DC, Massachusetts, Rhode Island, and Vermont |
| Penalty for not having health insurance in California | $900 per adult and $450 per dependent child under 18 |
| Example of penalty calculation in California | $3,502.08 for a family with household income higher than the flat amount |
| Other states with individual mandates but no penalty | Maryland |
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What You'll Learn
Federal tax penalty for not having health insurance
The Affordable Care Act (ACA) imposed a federal tax penalty on individuals without health insurance starting in 2014. This was known as the "Individual Responsibility Payment" or "Shared Responsibility Payment". However, the Tax Cuts and Jobs Act, passed in 2017, reduced this penalty to zero starting in 2019. Consequently, individuals are no longer required to report on their federal income tax returns whether they had health insurance during the year, and they are not subject to a federal tax penalty if they did not have coverage.
Despite the removal of the federal tax penalty, some states have implemented their own health coverage requirements, with penalties for residents who do not maintain coverage. These states include California, Massachusetts, New Jersey, Rhode Island, Vermont, and the District of Columbia. For example, in California, the penalty for not having coverage for the entire year will be at least $900 per adult and $450 per dependent child under 18 when filing state income tax returns.
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. The District of Columbia also has an individual mandate requirement, with penalty amounts based on the previous federal penalty in 2018 (a flat $695 per adult, half that for a child, or 2.5% of income, whichever is higher).
It is important to note that, while Vermont technically has an individual mandate, there is no penalty for non-compliance, similar to the current federal-level policy. Additionally, while Maryland initially considered legislation that included an individual mandate and penalty, the final version of the law did not include any penalty language.
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State-level penalties
In most states, there is no longer a penalty for lacking health insurance. The ACA's federal tax penalty for not having minimum essential coverage was eliminated after 2018 under the Tax Cuts and Jobs Act of 2017. While the coverage requirement is still technically in effect, there is no longer a federal penalty for non-compliance. However, some states have implemented their own health coverage requirements and penalties for residents who fail to maintain coverage.
- Massachusetts: Implemented an individual mandate and penalty in 2006, which remains in effect. The penalty amount is based on the person's income and the cost of health plans available through the Massachusetts health insurance exchange.
- District of Columbia: Enacted an individual mandate and penalty in January 2019, based on the previous federal penalty. The penalty is either a flat $695 per adult (half for a child) or 2.5% of income, whichever is higher. The maximum penalty is based on the average cost of a bronze plan in DC.
- New Jersey: Introduced an individual mandate and penalty in January 2019, mirroring the previous federal penalty. The maximum penalty under the percentage of income calculation is based on the average cost of a plan in the state.
- Vermont: Enacted legislation in 2018 to create a state-based individual mandate, but the penalty language was ultimately removed. While Vermont technically has an individual mandate, there is no penalty for non-compliance.
- Maryland: Initially included an individual mandate and penalty in HB814/SB802 in 2019, but this portion was removed before passage.
Additionally, California imposes a penalty for not having coverage, with a minimum of $900 per adult and $450 per dependent child under 18 when filing state income tax returns.
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Exemptions
Since 2018, there has been no federal penalty for not having health insurance. The Affordable Care Act's (ACA) 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 and penalties for residents who fail to maintain coverage. These states include California, Rhode Island, New Jersey, DC, and Massachusetts. Vermont had also planned to implement a penalty, but the language was ultimately removed from the legislation.
While there is no longer a federal penalty for not having health insurance, some states have their own exemption processes. For example, California has Covered California, which offers exemptions from the fee for not having health coverage. Similarly, residents of the District of Columbia can visit DC Health Link, and those in Maryland can refer to the Maryland Health Connection for information on exemptions and exemption forms.
To obtain an exemption, you typically need to apply through programs like Covered California. However, some exemptions can be claimed directly when filing your state tax return, without requiring a separate application. Here are some common exemptions:
- Income below the state tax filing threshold: Even if you don't need to file taxes, you may choose to do so if you received financial assistance to lower your monthly premium payment.
- Short coverage gap: If you had a short gap in coverage of three consecutive months or fewer.
- Unaffordable health insurance: If, based on your actual income reported on your state income tax return, health insurance is deemed unaffordable. Specifically, if the cost of the lowest-cost Bronze plan or the lowest-cost employer-sponsored employee-only plan exceeds a certain percentage of your income for the tax year. For example, in 2023, the threshold is 8.17%, which will decrease to 7.97% in 2024 and 7.28% in 2025.
Other exemptions that may require an application include:
- Membership in federally recognized tribes, including Alaskan Natives, or eligibility for services through an Indian health care provider or the Indian Health Service.
- Incarceration (in jail, excluding incarceration pending the disposition of charges).
- Enrollment in limited or restricted-scope Medi-Cal or similar insurance.
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Calculating penalty fees
The penalty fees for not having medical insurance vary depending on the state in which you live. Since 2019, there has been no federal penalty for not having health insurance, but some states have implemented their own health coverage requirements with penalties for non-compliance.
In California, the penalty for not having coverage for the entire year will be at least $900 per adult and $450 per dependent child under 18 when filing your 2023 state income tax return in 2024. For instance, a family of four that goes uninsured for the whole year would face a penalty of at least $2,700. The penalty is applied by the California Franchise Tax Board. California also has a Penalty Estimator Tool on its website to help residents estimate their potential penalty.
In Rhode Island, an individual mandate with a penalty for non-compliance was implemented in 2020. The revenue generated from the penalty is used to fund the state's reinsurance program.
Massachusetts has had an individual mandate and penalty in place since 2006. From 2014 to 2018, residents who were uninsured only had to pay the state penalty, but now that the federal penalty has been eliminated, only the state's penalty applies.
Other states, like Vermont and Maryland, have considered or enacted legislation related to individual mandates and penalties, but the final versions of the laws did not include penalty provisions. Instead, these states have focused on creating "easy enrollment" programs to connect uninsured individuals with health coverage options.
It's important to note that the penalty fees and requirements vary by state, and some states may have updated their policies since the last available information. Therefore, it's recommended to check with your specific state or a tax preparer to understand the current requirements and potential penalties for not having medical insurance.
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Health coverage requirements
Federal Level:
At the federal level, the individual mandate penalty, also known as the "Shared Responsibility Payment," was eliminated at the end of 2018 under the Tax Cuts and Jobs Act of 2017. This means that there is currently no federal penalty for not having health insurance. The coverage requirement is still technically in effect, but there are no penalties for non-compliance.
State Level:
While there is no longer a federal penalty, some states have implemented their own health coverage requirements and penalties. Here are some examples:
- California: California enacted legislation in 2019 that created an individual mandate with a penalty for non-compliance, starting in 2020. The revenue generated from this program is used to offer additional state-funded health insurance subsidies.
- Rhode Island: Rhode Island also implemented an individual mandate effective in 2020, with a penalty for those who do not comply. The revenue is used to fund the state's reinsurance program, stabilizing the individual/family market.
- Massachusetts: Massachusetts has had an individual mandate and penalty in place since 2006. With the elimination of the federal penalty, residents are now subject to the state's penalty if they do not maintain coverage.
- Vermont: Vermont enacted legislation for a state-based individual mandate in 2018, scheduled to take effect in 2020. However, the penalty language was later removed, and the final version of the legislation did not include any penalties.
- Maryland: Maryland's HB814/SB802 legislation initially included an individual mandate and penalty, but this portion was removed before passage. Instead, the state created an "easy enrollment" program to connect uninsured individuals with health coverage using tax return data.
- New Jersey, DC, and Other States: Other states, such as New Jersey and DC, may also have their own health coverage requirements and penalties, so it is important to check the specific rules in your state.
Penalty Amounts:
Penalty amounts can vary depending on the state and specific circumstances. In California, for example, the penalty for not having coverage for the entire year is at least $900 per adult and $450 per dependent child under 18 when filing state income tax returns. A family of four without insurance for the whole year could face a penalty of at least $2,700. In some cases, the penalty may be calculated as a percentage of gross income exceeding certain thresholds.
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Frequently asked questions
The federal mandate for health insurance was removed in 2018, so there is no longer a federal penalty for not having health insurance. However, some states have implemented their own health coverage requirements with penalties for non-compliance. These include California, Rhode Island, New Jersey, DC, and Massachusetts.
The penalty amount varies depending on the state. For example, in California, the penalty for not having coverage for the entire year will be at least $900 per adult and $450 per dependent child under 18 when filing state income tax returns. In another instance, a family with a state filing threshold of $59,917 paid a penalty of $3,502.08.
You can check with your state or tax preparer to see if your state requires health coverage. If you live in a state that mandates health insurance and you don't have coverage or an exemption, you will be charged a fee when filing your state taxes.
