The Affordable Care Act included a health insurance mandate that required most citizens and legal residents to obtain coverage or face penalties when filing federal taxes. While most federal penalties have since been removed, several states still mandate coverage as part of filing state tax returns or risk facing penalties when filing state taxes.
Due to the Tax Cut and Jobs Act of 2017, the Affordable Care Act penalty expired at the beginning of 2018. However, several states still enforce individual mandates through state tax returns.
1. No Federal Penalty
The Affordable Care Act, commonly referred to as Obamacare, had penalties associated with not having health insurance that were cancelled by the Tax Cuts and Jobs Act of 2017. However, some states continue to enforce their own coverage requirements and penalties on individuals who do not possess qualifying coverage.
Before the repeal of the individual mandate, the IRS required those without qualified coverage to pay an IRS filing fee in the form of either a flat rate or percentage of their household income when filing their taxes. Individuals without health insurance were subject to paying the higher of these two fees; to avoid paying it altogether they had to apply for an exemption which might include being homeless, belonging to certain religious organizations, being part of health sharing ministries, and financial hardship as valid reasons.
Penalties for not having health insurance were generally calculated based on the cost of an Affordable Care Act-compliant plan in an individual’s location, as this law aimed at making health coverage more accessible to lower income people. Each year a detailed affordability schedule is released outlining which range of premiums would be considered affordable to individuals in each state.
Federal penalties were levied per-month for individuals or families that went without health coverage, in addition to an annual flat fee that varied year to year. Anyone who owed an obligation was required to file their tax return with the IRS and provide details about their annual income as well as an accounting of any uncovered months during that year.
New Jersey is currently one of the states that comply with federal mandates regarding individual mandates; penalties imposed through filing taxes reflect federal requirement from 2014-2018. DC, Massachusetts, California, Rhode Island and Vermont also impose state-mandated individual mandates with penalties collected via tax returns.
2. No State Penalty
The Affordable Care Act made significant strides toward making health insurance accessible and affordable for all Americans. Under its original mandate, individuals were required to maintain minimum essential coverage or face a shared responsibility penalty when filing federal tax returns – this penalty has since been removed, although some states and D.C. may still enforce it through state tax returns systems.
Current state requirements in California, Massachusetts, New Jersey and Rhode Island mandate health insurance or face a tax penalty based on income and household size; the penalty cannot exceed the annual premium of the lowest-priced plan available through their health insurance marketplaces. A short gap may occur; however the state must be informed as soon as this happens in order for your penalty to begin.
Some states impose individual penalties for those without health insurance coverage, in addition to state mandates and penalties. Maryland passed legislation in 2019 that initially included both requirements and penalties; the final version did not contain this language, however. Instead, an “easy enrollment health insurance program” was created that uses information from tax returns to connect uninsured residents with their respective state health exchange (more details here).
Florida and South Carolina are considering individual mandates, while most other states rely on federal tax penalties as an incentive to maintain coverage. Going without health insurance can have serious financial repercussions; medical bills are an expensive financial drain if paid out-of-pocket. To protect yourself against fines that come with going uninsured, purchase an appropriate plan that meets both your needs and budget – our expert insurance agents are always happy to offer free quotes so get one today!
3. No State Mandate
As part of the Affordable Care Act’s repeal in 2019, the federal penalty for not having health insurance was eliminated; however, individual mandate remains active in some states. While penalties at state levels tend to be much less harsh than their federal equivalents, going without coverage poses a substantial financial risk that should not be ignored.
New Jersey, California, Rhode Island, Massachusetts and DC currently impose individual mandate penalties that are collected during tax filing for residents who do not maintain coverage. Penalties vary by location and can depend on income, family size and length of time without coverage; they’re designed to encourage people to enroll while helping the state offset some of its cost associated with offering subsidized plans.
These states also impose employer mandates to prevent medical bankruptcies due to lack of coverage and ensure a stable health insurance marketplace. As well as covering uninsured workers, employer mandates help maintain an efficient health care marketplace.
Since the Affordable Care Act’s individual mandate was implemented, numerous studies have assessed its effects on health insurance markets and premiums. Researchers found that, although enrollment in individual markets decreased due to this mandate, it wasn’t a major driver of higher costs for consumers; other nonfinancial factors may be driving consumer responses instead, including complying with law enforcement and inertia in decision making processes.
No matter if your state mandates health coverage for its residents, having proper health coverage is still key for you and your family’s protection. Speak to a licensed insurance professional in your area about local laws regarding insurance requirements in order to avoid fines associated with not having coverage; exploring your options through an HRA plan might also prove useful – we are here to assist in helping navigate them successfully!
4. No State Tax Penalty
With the recent repeal of the Affordable Care Act individual mandate penalty in 2019, many Americans are wondering whether or not it is still legal to go without health coverage. Although federal authorities no longer mandate health coverage, four states and the District of Columbia still impose penalties based on percentages of income – similar to what was used under Obamacare for its individual mandate penalty.
State penalties must be reported and paid along with your federal taxes when filing them with the IRS. Previously, ACA’s individual mandate penalty was collected through federal taxes as part of Form 8965 when filing federal returns; it assessed an assessed monthly per-month penalty – either flat fee or percentage of household qualifying annual income depending on which was higher – assessed per uncovered month during the year; individuals could claim exemptions for reasons such as financial hardship or religious beliefs in order to forgo this penalty altogether.
Massachusetts instituted an individual mandate in 2006 as an example for the Affordable Care Act (ACA). While federal individual mandate penalties have since been repealed, Massachusetts’ penalties remain in force (based on 2023 filing season tax calculations). Massachusetts uses multiple income thresholds and exemptions when calculating its penalty; calculated both as a percentage of income and flat fee fees with any excess penalties being used to fund programs to help individuals afford health insurance policies.
Repercussions for not having health insurance can be far-reaching, beyond any fines that might apply. Failing to reap its benefits could leave you exposed to unexpected medical bills that can become overwhelming; especially in case of hospitalization and long-term care planning needs. It is crucial that you check with your state’s insurance department or an experienced insurance professional to remain up-to-date on laws and regulations specific to your area.
