q. Is there still a penalty for not having insurance?
a. When the Affordable Care Act was written, lawmakers knew it would be essential for healthy people to sign up for coverage, since insurance only works if there are enough low-cost enrollees to balance the sickest enrollees and higher cost. so the law included an individual mandate, also known as the shared responsibility provision.
This controversial provision stipulated that individuals who did not have minimum essential coverage would be subject to a tax penalty unless they were exempt from the shared responsibility provision.
but that tax penalty was removed 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 place, but there is no longer a penalty to enforce it .
(The continued existence of the mandate, but without the penalty, is the crux of the California v. Texas lawsuit, in which 18 states challenge the constitutionality of the mandate without the penalty and argue that the entire ACA should be struck down if the mandate is unconstitutional. a judge ruled in december 2018 that the aca should be struck down, and the trump administration agrees. the case was appealed to the fifth circuit and oral arguments were heard in july 2019. the ruling was issued in late 2019, essentially just kicking the can down the road: the appellate court panel agreed with the lower court that the individual mandate is unconstitutional, but sent the case back to the lower court to determine what aspects of the aca should be overturned by the supreme court in the fall of 2020, with a ruling expected in the spring of 2021. but with the biden administration and a very thin democrat majority in congress, it may be possible to do er that the case is moot before the ruling is issued).
dc, massachusetts, new jersey, california and rhode island have penalties for not having insurance
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 their own individual mandates and penalties for noncompliance:
- massachusetts implemented an individual mandate and penalty in 2006, and it remains in place (people who were uninsured in massachusetts between 2014 and 2018 did not have to pay both state and federal penalties , but now that there is no federal penalty, the state penalty applies the same as before 2014). The massachusetts penalty only applies to adults, and the amount of the penalty is based on a person’s income and the cost of health plans available through the massachusetts health insurance exchange (details here are ticket amounts in massachusetts in 2020).
- the district of columbia implemented an individual mandate and penalty that became effective in January 2019. penalty amounts are based on the amounts that were enforced under the federal penalty in 2018 ( a flat amount of $695 per adult — half of 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 national average cost of a bronze plan. plan.
- new jersey also implemented an individual mandate and penalty effective January 2019. penalty amounts also reflect prior federal penalty, but maximum penalty based on percentage calculation income is based on the average cost of a bronze plan in new jersey. the state is using penalty revenue to help fund its new reinsurance program.
- california enacted legislation in 2019 that created an individual mandate beginning in 2020, with a penalty for noncompliance. California also created a new state-based premium subsidy to help make coverage more affordable.
- rhode island also implemented an individual mandate beginning in 2020, with a penalty for noncompliance. proceeds generated from the sanction are used to help fund the state’s new reinsurance program. Both the individual mandate and the reinsurance program will have a stabilizing effect on the individual market in Rhode Island.
vermont enacted a mandate but chose not to impose any penalties for non-compliance
vermont enacted legislation in 2018 to create an individual state mandate, but it was scheduled to take effect in 2020, rather than 2019, as the details of the penalty were not included in the legislation. 2018 and were instead left for legislators to work through during the 2019 session. but the penalty language was eventually removed from the 2019 legislation (h.524) and the version that passed did not include any penalties. therefore, even though vermont technically has an individual mandate as of 2020, there will be no penalty associated with non-compliance (i.e. essentially the same as applies at the federal level).
maryland also removed the penalty language from the 2019 legislation
maryland enacted hb814/sb802 in 2019. the legislation initially included an individual mandate and penalty that would have gone into effect in 2021, but that portion of the bill was removed before passage, despite the support of insurers. and the Maryland Hospital Association, and the final version did not include any of the sanctions language from the original mandate. Instead, the new law creates an “easy enrollment health insurance program” that will use tax return data to identify uninsured people who are interested in getting health coverage, and then connect them with the maryland health insurance exchange (more details here, in the fiscal note).
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 opinion pieces and educational articles on the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by the media covering health reform and by other health insurance experts.