In most states, no, having health insurance is not mandatory. However, several states do mandate coverage, often enforced by charging a penalty to uninsured individuals. The following locations enforce a mandate:
- New Jersey
- Rhode Island
- Washington, D.C.
Of these, Vermont is the only state that does not hand down a penalty. In other cases, uninsured and unexempt residents pay a fine when they file taxes. These penalties vary widely, usually calculated based on income or a fee scale. Each jurisdiction also allows exemptions related to hardship or affordability. They all provide resources for low-income individuals to access healthcare, too.
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What Is an Individual Mandate and Why Implement Them?
Starting in 2014, the Affordable Care Act (ACA) mandated all individuals to maintain health insurance. With some exemptions, noncompliant taxpayers faced a penalty of $695 per person or 2.5% of their household income. Each person needed to enroll in an ACA-approved plan that provided minimum essential coverage.
By enforcing the individual mandate, the government aimed to expand coverage and reduce overall costs thanks to a broader insurance “risk pool.” As more people — especially healthy people — pay premiums, insurers’ risk reduces, and they can pay out more claims. Eventually, premiums could lower for everyone.
Ultimately, the federal tax penalty was eliminated in 2019, making the individual mandate ineffective. However, several states instated their own version to ensure their residents stay covered and attempt to minimize healthcare costs.
How Do Individual Mandates Work?
Mandated health insurance involves a tax penalty paid when residents file the following year. They will receive a bill if their tax return does not cover the fee. The amount varies in each state based on its penalty scale and exemptions.
Massachusetts mandates health insurance for residents over 18 as long as they can afford it. Residents must enroll in a plan that meets minimum creditable coverage (MCC) standards, which includes preventative care, comprehensive coverage, and a deductible cap.
The penalty varies based on age, income, and family size, but it adds up each month someone goes without insurance. The maximum penalty is half of the lowest-cost plan available through the state’s ConnectorCare insurance exchange.
The state offers exemptions for people under 150% of the federal poverty level. Uninsured individuals can appeal based on hardship, including homelessness, family size, or natural disaster. Massachusetts also allows a grace period for lapses of 3 or fewer months.
Unlike Massachusetts, New Jersey’s mandate only applies to individuals who have to file taxes. New Jersey requires minimum essential health coverage, which includes Healthcare.gov plans, Medicare Part A, and most employer-sponsored plans.
While the penalty depends on family size and income, the state sets a range. Individual filers pay between $695 and $3,661, while families that earn over $400,000 pay $2,351 to $19,793. However, the penalty will not exceed the average annual premium for Bronze Health Plans in the state.
New Jersey provides exemptions for people who cannot afford insurance, who experience short gaps in coverage, or who face hardship, such as domestic violence or bankruptcy.
Although Vermont implemented an individual mandate, the state does not charge a penalty to uninsured individuals. When residents file their state taxes, they must report whether they had insurance, including Medicare or Medicaid, each month out of the year. However, they will not face a cash penalty for answering “no.”
The state insurance marketplace, Vermont Health Connect, offers qualified health plans that meet minimum essential coverage requirements. Vermont also provides financial assistance to low-income individuals.
California’s health insurance mandate requires adults and dependents to maintain health insurance or face a penalty when they file state taxes. Individuals without coverage for the entire year pay at least $850 for themselves and $425 for each dependent child.
Residents can shop for health insurance through the state marketplace, Covered California. These plans meet California’s essential health benefits, including emergency services, pregnancy care, and prescription drugs.
Among other reasons for not maintaining coverage, uninsured individuals may claim an exemption if the least expensive plan would cost more than 8.17% of their income. Covered California also reviews applications for exemptions related to affordability, religious conscience or general hardship.
Rhode Island requires insurance coverage for anyone who files taxes. The state allows exemptions such as living abroad, inability to pay for coverage, or participating in a healthcare sharing ministry. Rhode Island also permits gaps of 3 months or fewer. Residents are considered covered for the month if they had minimum essential coverage for at least one day.
Rhode Island charges penalties based on a flat fee or percentage of income, whichever is higher. The flat fee costs $57.92 per month for adults and $28.96 for each child. Alternatively, residents may pay 2.5% of their modified adjusted gross income. The penalty cannot exceed the annual premiums for the state’s Average Bronze Plan.
District of Columbia
Washington, D.C.’s individual mandate follows a similar penalty structure to Rhode Island’s. A family who goes without health insurance for the entire year could be liable for 2.5% of their income over the filing threshold, or a flat rate of $745 per adult and $372.50 per child, up to $2,235 per family. The state charges the higher value.
The mandate applies to residents over 21 whose income is at least 222% of the federal poverty level. Residents must maintain minimum essential monthly coverage unless they have a valid income or hardship exemption.
How To Get Help Accessing Affordable Insurance
You may qualify for assistance if you cannot afford health insurance premiums. These options can help you avoid a tax penalty risk.
ACA Subsidized Plans
The ACA uses sliding-scale subsidies to lower premiums on plans purchased through federal or state-specific Marketplaces. You may be eligible for a premium tax credit depending on your household income. If you apply all or part of this credit to your premium, the Marketplace will send it directly to your insurer, reducing your monthly out-of-pocket premium. These apply to all “metal” levels of plans.
Premium tax credits are available to eligible individuals whose income is at or above the federal poverty level: $14,580 for individuals or $30,000 for a family of four in 2024. Eligibility requirements include:
- U.S. citizenship or proof of legal residency
- No access to affordable employer-sponsored insurance
- Not eligible for Medicare, Medicaid, or CHIP
With a premium tax credit, you can spend less on your monthly premium while still maintaining minimum essential coverage.
Medicaid and CHIP
Medicaid provides health insurance coverage to low-income individuals, the elderly, pregnant people, and people with disabilities. Some states expand Medicaid coverage to all adults under a certain income level. These plans adhere to federal standards, but costs and coverage vary, and each state sets its own income limits.
The Children’s Health Insurance Program (CHIP) offers insurance to children whose guardians are not eligible for Medicare but still need financial assistance.
Both programs offer free and low-cost services, and participating in either program counts as having minimum essential coverage in most cases. Therefore, enrolled individuals will not have to pay a mandate penalty.
In most cases, having Medicare coverage meets individual mandate requirements. Beneficiaries typically must enroll in Medicare Part A, known as hospital insurance. California also requires Part D, or prescription drug coverage.
Medicare eligibility depends on age or health status. This program is available for adults over 65, people with disabilities, and people with end-stage renal disease. Most beneficiaries do not pay a premium for Part A, depending on how long they worked or have received disability benefits. This makes it more affordable than private insurance while meeting minimum essential coverage requirements.
All in All
States implement individual mandates to ensure that everyone has adequate health insurance, while reducing the overall economic strain of healthcare costs. But paying for private insurance out-of-pocket adds up, and this monthly expense is unsustainable for many people.
To avoid paying a penalty for not having health insurance, take advantage of any available subsidies or state-sponsored programs. If none apply, you can still appeal to the state if you have experienced any of these common hardship exemptions:
- Domestic violence
- Unpaid medical expenses
- No access to affordable coverage
- Essential utilities shutoff
- Death of spouse of primary provider
However, the risk of not having insurance is greater than the tax penalty. Insurance saves you money on medical services, out-of-pocket costs, and urgent care. Experiencing a medical emergency without insurance can lead to significant financial consequences.