Does Your State Require You to Have Health Insurance Coverage?

As of 2019, the Obamacare insurance mandate, which requires individuals to buy a health insurance policy or pay a tax fee, is no longer in effect at the federal level. Nevertheless, five states and the District of Columbia have individual mandates at the state level. 

You may be subject to a penalty for not having health insurance if you are a resident of one of the following regions:

  • New Jersey
  • Massachusetts
  • California
  • Rhode Island
  • District of Columbia (Washington D.C.)
  • Vermont
  • District of Columbia (Washington D.C.)

No matter which region you live in, Insurance Shopping can help you get the health insurance you need. Check out and compare low-cost health insurance plans in your state.

What is the Individual Health Insurance Mandate?

The marketplace insurance programs established by the Affordable Care Act (ACA) provide health coverage to approximately 11.41 million consumers, based on April 2020 data provided by the CMS (Centers for Medicare & Medicaid Services).

Prior to 2020, if you didn’t have an ACA-compliant health insurance plan for more than two consecutive months, you were subject to a tax penalty. This requirement was typically known as the “Obamacare individual mandate”. The primary objective of the liability was to encourage everyone to buy health insurance if they weren’t covered through their employer or a government-sponsored program. According to Kaiser Health News, the federal ACA penalty for not having health insurance in 2018 was $695 per uninsured adult or 2.5 percent of your income. 

In response to complaints about the affordability of marketplace ACA plans, Congress approved the Tax Cuts and Jobs Act (TCJA) at the end of 2017. Furthermore, the law reduced the individual penalty for the Obamacare individual mandate to zero dollars beginning in 2019. Now that the individual mandate tax deduction has been removed, there is no tax penalty at the national level.  

State Response to the Repeal of the Obamacare Individual Health Insurance Mandate Penalty

Many states have enacted state-level individual insurance mandates. These insurance mandates encourage residents to obtain coverage and help reduce the cost of healthcare purchased through the public exchange. The penalty for failure to get qualifying health insurance varies by state. 

California Individual Mandate

  • Starting date: January 1, 2020
  • Requires individuals and their family members to have ACA-approved health insurance
  • Imposes a penalty fee on California residents who do not have health insurance but can afford it.
  • Provides state subsidies to help low-income residents afford health insurance.

In 2021, the annual penalty for California residents who don’t have health insurance was 2.5 percent of their household income. Or at least $750 per adult and $375 per dependent below 18, whichever amount is significant. The dollar figures will rise in value each year due to inflation. The penalty fee is limited to the state average premium for a bronze-level coverage on the California exchange for the acceptable household size. However, the insurance premium will be waived if it exceeds 8.3 percent of household income.

Eligibility for Tax Exemption

You might be eligible for tax exemption in a few circumstances, such as

  • Religious conscience exemption. If you or anyone in your family belong to a recognized religion that opposes private insurance or believes solely in spiritual healing. In that situation, you might be eligible for a religious conscience exemption.
  • Hardship exemption. The tax penalty does not apply if you were unable to obtain health insurance due to certain hardships, such as eviction, homelessness, domestic violence, natural disaster, domestic violence, bankruptcy, and so on.
  • Affordability exemption. The penalty fee is waived if the least expensive coverage premium available to you costs more than 8.27 percent of your household income in 2021.
  • Short coverage gap. If you go without coverage for three months or less, you will be exempt from paying taxes.

According to data from the federal exchange, Covered California, the legislation of the individual mandate helped reduce premiums by 3.2 percent on average in 2020. Covered California expects that this could save California residents an average of $167 per year on their medical insurance premiums in 2020. Moreover, the government will use penalties resulting from California’s individual mandate to finance a three-year program that will provide state subsidies to help middle and low-income households purchase coverage through the state exchange.

Massachusetts Individual Mandate

  • Starting date: January 1, 2006
  • Requires individuals to have ACA-approved health insurance
  • Imposes a penalty fee on California residents who do not have health insurance but can afford it.
  • Provides state subsidies to help low-income residents afford health insurance.

Officials claim that Massachusetts has one of the highest levels of insurance coverage in the country, with up to 97.5 percent of residents having health insurance, thanks to a health insurance mandate.

The Massachusetts individual mandate predates the Obamacare and Affordable Care Act individual mandate. Furthermore, it served as a model for the Obamacare individual mandate. The penalty fee varies by age, income, and household size. It can reach up to 50% of the minimum monthly insurance premium that an individual would have approved for through Health Connector, Massachusetts’ health coverage exchange. 

The following points explain how the Massachusetts tax penalty works:

  • You will not be penalised if you live in Massachusetts and cannot afford health insurance. In addition, if your income is equal to or less than 150 percent of the federal poverty level, you will not be subject to a tax penalty.
  • If you owe a penalty fee, the amount varies depending on your income, age, and family size. 
  • The tax penalty cannot exceed 50% of the least expensive plan premium available through Health Connector, Massachusetts’ health insurance exchange. 

New Jersey Individual Mandate

  • Starting date: January 1, 2019
  • Requires individuals and their family members to have ACA-approved health insurance
  • Imposes a penalty fee on New Jersey residents who do not purchase health insurance but can afford it.
  • Provides state subsidies to help low-income residents afford health insurance.

The New Jersey penalty also known as the Shared Responsibility Payment is calculated based on household income (including the income of any dependents) and family size. Nevertheless, the penalty is restricted to the cost of the average statewide premium for the bronze health insurance programs. 

According to NJ.gov, the minimum tax deduction for residents is $695 and the maximum penalty is $3,012 for the 2021 tax year. For a family of five with an average household income of $200,000 or less, the minimum tax deduction in 2021 is $2,351, and the maximum is $4,500. If you are not required to submit a tax return in New Jersey for 2021, you can avoid paying this fine.

Additionally, exemptions are available under New Jersey law in certain circumstances. For example, if you cannot afford the health plans offered by the marketplace or your employer, you might be eligible for an exemption. Plan premiums must exceed 8.05 percent of your household income for the calendar year. There may also be tax exemptions based on religious beliefs or financial hardship.

Washington D.C. Individual Mandate

  • Starting date: January 1, 2019
  • Requires individuals and their family members to have ACA-approved health insurance
  • Imposes a penalty fee on residents who don’t buy health insurance but can afford it.
  • Provides tax exemptions in certain circumstances such as pregnancy, financial hardship, or eviction

Residents who go without qualifying health coverage for one year and do not register for an exemption may be subject to a tax penalty. The penalty is either 2.5 percent of the gross family income or $695 per individual and $347.50 per child; you will pay whichever cost is higher.

According to Washington state regulations, the maximum penalty for going without coverage in D.C. (“penalty limit”) is based on the average premium costs for bronze-level health policies available through D.C. Health Link. In 2020, this amount was $3,448/year per person. And for families with more than one person without a health policy, it is multiplied by the total number of people in the family who do not have coverage, up to a maximum of five family members. So, families consisting of five members or more who went the entire year without health coverage could face a penalty of up to $17,240 in 2020. 

Rhode Island Individual Mandate

  • Starting date: January 1, 2020
  • Requires individuals and their family members to have ACA-approved health insurance
  • Imposes a penalty fee on New Jersey residents who do not purchase health insurance but can afford it.
  • Provides state subsidies to help low-income residents afford health insurance.

It will cost a household $695 for each uninsured individual and $347.50 for each uninsured child, or 2.5 percent of the family income, whichever amount is significant. Inflation also causes penalities to fluctuate from year to year. However, the maximum penalty that a household can face can’t be greater than the total premium paid for an average bronze-level coverage in this state.

Rhode Island allows for tax exemptions in certain circumstances. As of December 31, 2020, Rhode Island extended its eligibility requirements to include a COVID-19 hardship exemption. This new provision recognized the potential impact of the pandemic on residents’ ability to afford and obtain health insurance. If you are a resident of Rhode Island, you may qualify to file for a hardship exemption if: 

  • You lost minimum essential health coverage in 2020, or
  • You experienced hardships that prevented you from purchasing minimum essential coverage in 2020.

Vermont Individual Mandate

  • Starting date: January 1, 2020
  • Individuals must self-register whether or not they purchase ACA-approved health plans during the 2020 taxation on their 2020 tax forms.
  • There are no tax deductions for failure to obtain ACA-compliant health coverage in 2020.

Vermont residents are required to report whether or not they have health coverage when they submit state taxes. This may include Medicare or Medicaid coverage. Nonetheless, unlike other states with Obamacare individual mandate laws, there is no tax penalty for failure to obtain minimum essential health coverage.

Although Vermont does not penalize residents who fail to meet the state’s individual health insurance mandate, this does not rule out the possibility of a penalty in the future. If you live in Vermont, you should be aware that lawmakers may develop and implement a tax penalty for those who are mandated to have an ACA plan but do not purchase it.

What can I do to Avoid the Individual Mandate Tax?

You can avoid this penalty by enrolling in a health insurance plan during the open enrollment period. It’s essential because it will protect you from the financial burden of unexpected medical expenses and other healthcare costs. The national open enrollment period for the 2023 health coverage will run from November 1 to December 15, 2022. Some regions have extended this annual enrollment period. 

Suppose you lose your coverage in the middle of the year. In that case, you might be eligible for a SEP to purchase an ACA plan on the public exchange. You are free to buy an ACA-approved plan outside of the public exchange at any time of the year. Depending on your state of residence, you will be able to sign for a short-term health insurance plan to help fill any coverage gaps that may arise during the year. 

As the leading online health insurance broker, Insurance Shopping offers a wide range of health insurance plans to meet your coverage needs regardless of your location. These include on and off-exchange Obamacare plans, short-term health insurance, and major medical insurance plans. Let us help you review your health options now. Select “Health Insurance” plans to find low-cost insurance coverage plans. Our licensed insurance agents are here to assist you and share their expertise as you weigh your options.