Q. Is there still an individual mandate under the Affordable Care Act, and does the IRS still enforce it?
A. The individual mandate — which requires most Americans to maintain health coverage — still exists. But starting with the 2019 tax year, there is no longer a penalty for non-compliance with the individual mandate. This is due to legislation that was enacted in late 2017; it eliminated the penalty as of 2019, but did not eliminate the actual individual mandate itself. So technically, the law does still require most Americans to maintain health insurance coverage. But the IRS no longer imposes a penalty on people who don’t comply with that requirement.
And the federal Form 1040 no longer includes a question about health insurance coverage (you can see the question near the top right corner of the 2018 form, but it was eliminated as of the 2019 version).
Some states have created their own individual mandates — separate from the federal mandate — with state-based penalties for non-compliance. Residents in California, DC, Massachusetts, New Jersey, and Rhode Island are required to maintain coverage and will face a penalty on their state/district tax returns if they fail to do so, unless they qualify for an exemption (Vermont also has an individual mandate, but has not yet created a penalty for non-compliance).
How did the IRS enforce the individual mandate in 2018 and prior years?
The ACA included a penalty, starting in 2014, for people who were uninsured and didn’t qualify for an exemption. The penalty amount ratcheted to its highest level in 2016, and remained at that level for 2017 and 2018, although the maximum allowed penalty under the percentage of income calculation has risen each year as average premiums have increased.
Enforcement of the Affordable Care Act’s penalty became a little more strict during the 2018 tax filing season. Starting in 2018, the IRS no longer accepted tax returns that didn’t include an answer to the question about whether the filer had health insurance during the year. This change came after the GOP tax bill (which included the eventual elimination of the mandate penalty) had been enacted.
To clarify, it is always illegal to lie to the IRS. So people couldn’t just say they had coverage when they actually didn’t. Employers, exchanges, and health insurance companies also report to the IRS; this wasn’t just the honor system. And although the IRS couldn’t use their normal enforcement avenues for collecting the penalty, they could deduct it from current or future tax refunds.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.