Jane Dotson
The Affordable Care Act (ACA) previously imposed a federal tax penalty for individuals without health insurance, known as the Shared Responsibility Payment. However, this requirement was eliminated after 2018, and currently, there is no federal penalty for not having health insurance. While the coverage requirement still technically stands, individuals without health coverage no longer need to seek exemptions to avoid penalty fees during tax seasons. Nevertheless, it is important to note that some states, including California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia, have implemented their own health coverage requirements with associated penalties for non-compliance. These penalties are typically assessed through state tax returns and calculated based on household income or a flat rate, whichever results in a higher amount. Therefore, it is advisable to check with your specific state or a tax preparer to understand the requirements and potential penalties for being uninsured in your state of residence.
| Characteristics | Values |
|---|---|
| Federal penalty for not having health insurance | Eliminated after 2018 |
| States with penalties for non-compliance | California, DC, Massachusetts, New Jersey, Rhode Island |
| California penalty | $900 per adult and $450 per dependent child under 18 or 2.5% of gross income above the filing threshold |
| DC penalty | $695 per adult, $347.50 per child, or 2.5% of income, whichever is higher |
| Massachusetts penalty | Based on income and cost of health plans |
| Exemptions | Financial hardship, short coverage gaps, unaffordable, member of exempt groups, homeless, evicted, utility shut-off, domestic violence, death in the family, natural disaster, bankruptcy, unexpected medical debt, caring for a family member, child denied coverage |
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What You'll Learn
No penalty for no medical insurance since 2018
Since 2018, there has been no federal penalty for not having health insurance in the United States. This means that you do not have to pay a tax penalty or "Shared Responsibility Payment" for not having health coverage.
However, some states have implemented their own health coverage requirements with penalties for non-compliance. These include California, New Jersey, Massachusetts, Rhode Island, and the District of Columbia. The penalty amount in these states is usually based on the number of people in the household or a percentage of gross income above the filing threshold. For example, in California, the penalty is either a flat amount based on the household size or 2.5% of gross income above the filing threshold, whichever is higher.
While there is no longer a federal penalty for not having health insurance, certain situations may require an exemption. For instance, if you are 30 or older and want to enroll in a "Catastrophic" health plan, you will need an exemption. A Catastrophic plan offers lower-priced coverage that protects you from high medical costs in the event of a serious injury or illness. To qualify for this type of plan, you must meet certain requirements, such as experiencing financial hardship or other circumstances that prevented you from obtaining health insurance.
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Some states have their own penalties
The federal individual mandate penalty for not having health insurance was eliminated at the end of 2018. While most states no longer impose a penalty for lacking health insurance, some states have implemented their own health coverage requirements with penalties for non-compliance. These penalties are assessed via state tax returns.
Massachusetts
Massachusetts has had an individual mandate and penalty in place since 2006. The penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. The revenue generated from the penalty is used to subsidize Health Connector programs.
District of Columbia (DC)
DC implemented an individual mandate and penalty in January 2019. The penalty amounts are based on the previous federal penalty: a flat $695 per adult, half of that for a child, or 2.5% of income, whichever is higher. The maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in DC. The revenue from the penalty is deposited into the District's Individual Insurance Market Affordability and Stability Fund, which is used to increase the availability of coverage options and the affordability of individual market premiums.
California
California enacted legislation in 2019 that created an individual mandate starting in 2020, with a penalty for non-compliance. The penalty is the higher of either a flat amount (based on the number of people in the household) or 2.5% of gross income above the filing threshold requirements. California has an information page with details on penalty amounts and exemptions. The revenue from this program is used to offer additional state-funded health insurance subsidies.
Rhode Island
Rhode Island implemented an individual mandate effective in 2020, with a penalty for non-compliance. The revenue generated from the penalty is used to help fund the state's reinsurance program.
New Jersey
New Jersey implemented an individual mandate and penalty in January 2019. The penalty amounts mirror the previous federal penalty, but the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in New Jersey. New Jersey uses penalty revenue to help fund its reinsurance program.
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Exemptions for those who can't afford insurance
Since 2018, there is no longer a federal penalty for not having health insurance in the US. However, some states have implemented their own health coverage requirements with penalties, including California, Rhode Island, Massachusetts, New Jersey, and DC. If you live in one of these states and are unable to afford health insurance, you may be able to apply for a hardship exemption.
Hardship Exemptions
Hardship exemptions are available for people whose current situation makes it difficult to afford health insurance. These are not permanent exemptions—they last until your circumstances improve. Common situations that may qualify you for a hardship exemption include:
- Homelessness
- Eviction or foreclosure
- Fire, flood, or other natural disasters that caused major damage to your home
- Bankruptcy
- Receiving a utility shut-off notice
- Death of a close family member
- Domestic violence
- High medical debt
- High expenses for caring for a sick, disabled, or aging family member
Affordability Exemptions
Affordability exemptions are another type of exemption that you can claim to qualify for catastrophic coverage. You can qualify for this exemption if the lowest-priced coverage available to you would cost more than 7.97% of your household income. If you want an affordability exemption for the entire calendar year, you must request it before January 1 of that year.
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Exemptions for financial hardship
Since 2018, there has been no federal penalty for not having health insurance. However, some states have implemented their own health coverage requirements with penalties, including California, Rhode Island, New Jersey, Massachusetts, and the District of Columbia. If you live in one of these states and are facing financial hardship, you may be able to apply for an exemption from the penalty.
Financial hardship exemptions are available for those who are unable to purchase health insurance due to their financial situation. To qualify for this exemption, you must meet certain criteria and provide supporting documentation. These criteria include:
- Homelessness
- Eviction or the threat of eviction or foreclosure
- Receiving a shut-off notice from a utility company
- Experiencing domestic violence
- The death of a family member
- A fire, flood, or other natural or human-caused disasters that caused significant property damage
- Bankruptcy
- Substantial debt due to unpaid medical expenses
- 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.
In addition to these financial hardship exemptions, there are also affordability exemptions. To qualify for an affordability exemption, the lowest-priced coverage available to you would need to cost more than 7.97% of your household income.
If you meet the criteria for a financial hardship exemption, you will need to submit an application and obtain an Exemption Certificate Number (ECN) to enroll in a "Catastrophic" health plan. These plans offer lower-priced coverage that primarily protects you from high medical costs in the event of a serious injury. Hardship exemptions typically cover the month before, the months of, and the month after the hardship. However, in certain cases, the Marketplace may extend the exemption for up to a full calendar year.
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Exemptions for short coverage gaps
Since 2018, there is no longer a federal penalty for not having health insurance in the US. However, some states have implemented their own health coverage requirements with penalties for non-compliance, including California, Rhode Island, Massachusetts, New Jersey, and DC. If you live in one of these states, you may be able to qualify for an exemption for short coverage gaps.
A short coverage gap refers to a period of time, usually three consecutive months or fewer, during which an individual does not have health insurance. While the specific rules and requirements may vary by state and individual situation, here are some general guidelines and scenarios for exemptions for short coverage gaps:
- Affordability Exemptions: If the cost of the lowest-priced health insurance plan available to you is more than a certain percentage of your household income, you may qualify for an affordability exemption. For example, in California, this threshold is 8.17% for the 2023 tax year, 7.97% for 2024, and 7.28% for 2025.
- Hardship Exemptions: If you experienced a hardship that prevented you from obtaining health insurance, you may be eligible for a hardship exemption. Hardships can include financial difficulties, homelessness, eviction, utility shut-off, domestic violence, the death of a family member, natural disasters, bankruptcy, unexpected medical debt, and caring for a dependent family member.
- Other Exemptions: There may be other state-specific exemptions that apply to your situation. For example, in California, if you are enrolled in limited or restricted-scope Medi-Cal or a similar insurance program, you may be exempt from the penalty. Additionally, if you are under 30 and wish to enroll in a "Catastrophic" health plan, you do not need an exemption.
It is important to note that the specific rules and requirements for exemptions may vary depending on your state and individual circumstances. Be sure to check with your state's official website or healthcare exchange for the most accurate and up-to-date information regarding exemptions for short coverage gaps.
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Frequently asked questions
The federal individual mandate penalty was eliminated at the end of 2018. However, some states like California, New Jersey, DC, Massachusetts, and Rhode Island have implemented their own health coverage requirements with penalties.
The penalty is calculated as either a flat rate or a percentage of your household income, whichever is higher.
Check with your state or tax preparer to see if your state requires health coverage. If you live in a state that requires health coverage and you don't have it, you will be charged a fee when you file your state taxes.
Yes, you can be exempt from the penalty if the insurance was unaffordable, you had no tax-filing requirement, experienced a hardship, had short coverage gaps, or were a member of certain exempt groups.
You will need to submit an application for the exemption and obtain an Exemption Certificate Number (ECN).
