A penalty for not having health insurance still applies in some places
- The federal individual mandate penalty was eliminated at the end of 2018.
- There is a penalty in New Jersey, DC, and Massachusetts.
- California and Rhode Island have individual mandate penalties as of 2020.
- Vermont enacted a mandate that takes effect in 2020, but there is no penalty for non-compliance.
- Maryland lawmakers also removed mandate penalty language from a 2019 bill before it passed.
- Use our penalty calculator to determine federal mandate penalty amounts from 2014 to 2018.
When the Affordable Care Act was written, lawmakers knew that it would be essential to get healthy people enrolled in coverage, since insurance only works if there are enough low-cost enrollees to balance out the sicker, higher-cost enrollees. So the law included an individual mandate, otherwise known as the shared responsibility provision.
But that tax penalty was eliminated after the end of 2018, under the terms of the Tax Cuts and Jobs Act of 2017. Technically, the individual mandate itself is still in effect, but there’s no longer a penalty to enforce it. [The continued existence of the mandate, but without the penalty, is the crux of the Texas v. Azar case, in which 20 states are suing the federal government, challenging the constitutionality of the mandate without the penalty, and arguing that the entire ACA should be overturned if the mandate is unconstitutional. A judge ruled in December 2018 that the ACA should indeed be overturned, and Trump Administration agrees. The case was appealed to the Fifth Circuit and oral arguments were heard in July 2019. A ruling from the appeals court is expected by the end of 2019, and the case could eventually reach the Supreme Court.]
Tax returns filed in 2019 — for the 2018 tax year — still included penalty assessments. So even though the penalty was eliminated after 2018, people were still having to pay the penalty in 2019 if they were uninsured in 2018.
DC, Massachusetts, and New Jersey still had a penalty in 2019
Although the IRS is not penalizing people who are uninsured in 2019 and beyond, states still have the option to do so. A handful of states have either implemented individual mandates and penalties, or have considered doing so:
- Massachusetts implemented an individual mandate and penalty in 2006, and it continues to be in effect (people who were uninsured in Massachusetts between 2014 and 2018 didn’t have to pay both the state and federal penalties, but now that there’s no federal penalty, the state’s penalty applies just like it did prior to 2014). The Massachusetts penalty only applies to adults, and the amount of the penalty is based on the person’s income and the cost of health plans available via the Massachusetts health insurance exchange (here are the details for penalty amounts in Massachusetts in 2019).
- The District of Columbia implemented an individual mandate and penalty that took effect in January 2019. The penalty amounts are based on the amounts that applied under the federal penalty in 2018 (a flat $695 per adult — half that for a child — or 2.5 percent of income, whichever is higher), although the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in DC, as opposed to the average nationwide cost of a bronze plan.
- New Jersey also implemented an individual mandate and penalty that took effect in January 2019. The penalty amounts also 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. The state plans to use penalty revenue to help fund their new reinsurance program.
California and Rhode Island have individual mandate penalties as of 2020
- California enacted legislation in 2019 that creates an individual mandate starting in 2020, with a penalty for non-compliance. California also created a new state-based premium subsidy to help make coverage more affordable. Between the two programs, California expects enrollment in ACA-compliant coverage to increase by nearly 230,000 people in 2020.
- Rhode Island also implemented an individual mandate effective in 2020, with a penalty for non-compliance. The revenue generated from the penalty will be used to help fund the state’s new reinsurance program. Both the individual mandate and the reinsurance program will have a stabilizing effect on Rhode Island’s individual market.
Vermont enacted a mandate but opted not to impose any penalty for non-compliance; Maryland also removed penalty language from 2019 legislation
- Vermont enacted legislation in 2018 to create a state-based individual mandate, but they scheduled it to take effect in 2020, instead of 2019, as the penalty details weren’t included in the 2018 legislation and were left instead for lawmakers to work out during the 2019 session. But the penalty language was ultimately stripped out of the 2019 legislation (H.524) and the version that passed did not include any penalty. So although Vermont does technically have an individual mandate as of 2020, there will not be a penalty associated with non-compliance (ie, essentially the same thing that applies at the federal level).
- Maryland enacted HB814/SB802 in 2019. The legislation initially included an individual mandate and penalty that would have taken effect in 2021. But that portion of the bill was removed before passage, despite support from insurers and the Maryland Hospital Association, and the final version did not include any of the original mandate penalty language. Instead, the new law creates an “easy enrollment health insurance program” that will use tax return data to identify people who are uninsured and interested in obtaining health coverage, and then connect them with the Maryland health insurance exchange (more details here, in the fiscal note).
ACA individual mandate penalty calculator
If you didn’t have coverage at some point between 2014 and 2018, you can use our calculator to determine your penalty amount (this has likely already been assessed on your tax return, unless you’ve delayed your filing).
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.