State Health Insurance Mandates and Penalties

Cathy Jakicic
August 1st, 2019 July 30th, 2019 |
Read time: 6 minutes

Products mentioned in this blog post:

Find out if you qualify for temporary coverage for emergencies and hospitalization – Don’t go uninsured between major medical plans.

When the Affordable Care Act (ACA) passed in 2010, it included a much-debated requirement called the individual mandate. Part of that mandate said that if you chose not to buy insurance and were not eligible for an exemption, you would be subject to a tax penalty called an individual shared responsibility payment (commonly referred to as the ACA tax penalty) when you filed your federal taxes.1

In December 2017, a new tax law was passed eliminating the tax penalty for individuals without insurance.2 The Tax Cuts and Jobs Act didn’t actually repeal the individual mandate. Instead, the tax bill set the penalty for noncompliance to zero after Dec. 31, 2018.3

That means that starting with the 2019 plan year, the Federal ACA tax penalty is eliminated, however, you may still be subject to a state tax penalty depending on where you live because some states have created their own individual insurance mandates to replace the federal version.4 Theses mandates require state residents to have qualifying health coverage or pay a fee with their state taxes.

States with state-level individual mandates as of July 2019:

  • Massachusetts5
  • New Jersey6
  • Vermont (to take effect in 2020)7
  • Washington D.C.8

States that attempted or are actively pursuing individual mandate legislation as of July 2019 include:

  • Maryland9
  • California10
  • Connecticut,11
  • Hawaii,12
  • Rhode Island,13
  • Washington14

We’ll look at the existing state mandates in more detail below. The information in this blog post is current through July 1, 2019.

No Individual Mandate in Your State? You May Have Other Health Insurance Options

If you reside in a state that has not enacted a state-level individual mandate and tax penalty, then you won’t pay a tax penalty if you don’t enroll in qualifying minimum essential coverage.

Major medical insurance is still the best option for those that can afford it. But if premiums are unaffordable and you don’t qualify for a subsidy, it’s still a good idea to get some level of health coverage for accidents and critical illnesses.

If you require emergency room treatment or hospitalization for several days it can be very difficult to pay out of pocket due to the high costs:

  • $2,233 – Average cost of hospitalization per day (2017)15
  • 5.5 days – Average hospital stay duration (2017)16
  • $150-$3,000 for less severe conditions; as high as $20,000 for critical care – Cost of emergency room care.17

Want Supplemental or Non-ACA Insurance?

Find Products Available for Me

Error

Short Term Health Insurance

Short term medical insurance is a type of non-ACA qualifying coverage that provides benefits for covered accidents or illnesses. These types of plans don’t have the level of coverage of major medical plans: they are not guaranteed issue, don’t cover pre-existing conditions or the essential health benefits, so if you enroll in this type of plan you’ll pay for routine healthcare costs out of pocket.

However, in most states you can enroll in these plans anytime during the year if you qualify since they’re not subject to the open enrollment period. And even though they can have relatively high deductibles, premiums are lower because the policies are more restricted in what they cover.

In 2017, the average short term health insurance premium for an individual was $109; it was $264 for families.18

If you think a short term policy may be right for you or your family, request a quote to compare costs and benefits.

Get a Short Term Insurance Quote

More on the States with Individual Mandates

Please note that the materials available at this website are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

Massachusetts

The Massachusetts Health Care Reform Law requires most residents over 18 who can afford health insurance to have coverage for the entire year, or pay a penalty through their state tax returns.19

The penalties are based on the number of months in the year that the resident doesn’t have the required health insurance coverage. However, Massachusetts does extend a grace period that allows lapses in coverage of three or fewer consecutive months.

Massachusetts’ penalties vary depending upon income, age and family size, but they can be no more than half of the lowest-priced plan available to an individual through the Massachusetts healthcare marketplace.

State residents must be enrolled in health insurance plans that meet “minimum creditable coverage”20 requirements, which are similar to the ACA’s essential benefits.

Learn more about Massachusetts’ health insurance laws and individual mandate.

New Jersey

Beginning January 1, 2019, New Jersey enacted the New Jersey Health Insurance Market Preservation Act, requiring New Jersey residents to maintain minimum essential health coverage, qualify for an exemption, or pay a penalty.21

As in the ACA, New Jersey’s mandate includes a penalty amount as the greater of:

  • 2.5% of modified adjusted gross income, or
  • $695 per adult (adjusted for inflation) and $347.50 per child, capped at three times the threshold regardless of family size or $2,085 (adjusted for inflation).22

One difference: The penalty amount is capped at the state average cost for bronze-level plans rather than the federal average.23

Learn more about New Jersey’s health insurance laws and individual mandate.

Vermont

Vermont has passed legislation that will create an individual mandate that will take effect in 2020, after the issue is studied further. Questions remain as to how to enforce the rule, either with a financial penalty or some sort of incentive.24

Washington, D.C.

Beginning in January 2019, residents of Washington, D.C. must have minimum essential coverage, according to the budget passed by the D.C. Council in June of 2018, or face a state tax penalty.25

Minimum essential coverage, like Massachusetts’ “minimum creditable coverage” meets the requirements of the ACA.

Also, as with the ACA, those who do not carry health insurance will face a tax penalty of $695 per uninsured adult, or 2.5% of household income, whichever is greater.

However, the maximum penalty is tied to the average cost of a bronze plan in DC, as opposed to the average cost of a bronze plan nationwide. The penalty will be adjusted annually for inflation.26

Learn more about Washington D.C.’s health insurance laws and individual mandate.

Summary + Next Steps

A number of states have passed or are considering their own individual mandates since the federal mandate was effectively eliminated. More states may adopt individual mandates, so make sure to stay up-to-date on the health insurance requirements in your state.

Major medical insurance remains your best option if you want the most comprehensive health benefits available and coverage that adheres to all ACA requirements.

If your state does not have an individual mandate and you want to explore non-ACA coverage options, then you can do so without paying a state or federal tax penalty.

Learn more about other health insurance options like short term medical insurance.

Please note: the materials available at this web site are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

Need Supplemental or Short Term Insurance?

Apply in 3 Easy Steps

  • Get a quote within seconds
  • Compare multiple plans
  • Finish application online
Originally Published On July 30th, 2019
Independence American Insurance Company and/or Madison National Life Insurance Company, Inc. may underwrite the products referenced on this website. Legal Disclaimers.

Footnotes

Get Health Insurance for 2020

Open enrollment is Nov. 1 to Dec. 15, 2019 in most states. Find out if you could qualify for an ACA subsidy.

 

ACA Subsidy Calculator

img