Does Your State Require You to Have Health Insurance? – Forbes Advisor

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The Affordable Care Act (ACA or, as it may be more commonly known: Obamacare) of 2010 was a major step in requiring and standardizing accessible health insurance at the federal level. The law also mandated that nearly all Americans have coverage, but Congress repealed that individual mandate penalty in 2017.

As of 2022, only five states (California, Massachusetts, Rhode Island, New Jersey and Vermont) and the District of Columbia require all eligible residents to declare annual proof of health insurance coverage on state taxes. If you’re uninsured and don’t qualify for an exemption, you must pay a tax penalty determined by the state (except Vermont, which does not levy any fees).

Do You Have to Have Health Insurance?

The federal government no longer penalizes you for not having health insurance. But a handful of states have an individual mandate that requires residents to have coverage.

When the Affordable Care Act was passed, one of the key parts of the legislature was the individual shared responsibility provision, known more colloquially as the individual mandate. This provision was the closest the United States came to requiring universal health coverage.

What is the individual mandate?

The individual mandate was the requirement, under the Affordable Care Act, that all eligible American citizens and permanent residents have basic health insurance (also referred to as minimum essential coverage, or MEC).

From 2014 until 2019, any individual without coverage was subject to tax penalties from the IRS. These federal penalties added up to $695 per uninsured adult or 2.5% of your income, depending on which amount was higher.

Congress repealed the mandatory financial penalties at a federal level in 2017. Although individuals are still technically required to have health insurance, fines are no longer imposed on anybody who doesn’t have coverage. This updated legislation took effect in 2019 and rendered the individual mandate irrelevant.

In response, a handful of states enacted their versions of the individual mandate with the tax penalties included.

The mandates vary, but all but Vermont have a penalty collected when an uninsured individual files state taxes.

Which States Require Health Insurance?

The only places with an individual mandate for health insurance are:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

Qualifying plans, exemptions and penalty criteria differ by state, so it’s important to make sure you know the fine print of your state’s system.

Generally speaking, any qualifying plan must meet the ACA’s standards for Minimum Essential Coverage. Penalties may not be applied if you were only uninsured for a few months. For example, in California, if you were uninsured for less than three months in a year, you’re not subject to a penalty.

Other states, such as Connecticut, Hawaii and Washington, are also considering adopting healthcare mandates.

Here is more information about each state’s individual mandate:

California individual mandate

Effective: Jan. 1, 2020

Qualifying Plans: Available here

Exemptions Available?: Yes

Tax Penalty?: Yes, paid to the California Franchise Tax Board

State Health Care Services: Covered California

All California residents must have either minimum essential coverage or qualify for an official exemption. A wide range of qualifying health care plans are offered, including some student health plans and Medicare Part A or Part C. Exemptions are available, but they must be either claimed on your state tax return or processed by Covered California.

If you’re not eligible for an exemption and don’t have health care, you will face penalties up to $800 per adult and $400 per dependent, assuming you’ve been without health care all year. You can calculate the expected penalty amount using the California Franchise Tax Board’s free online service.

District of Columbia individual mandate

Effective: January 1, 2019

Qualifying Plans: Available here

Exemptions Available?: Yes

Tax Penalty?: Yes

State Health Care Services: DC Health Link

Known officially as the Washington D.C. Individual Taxpayer Health Insurance Responsibility Requirement, the mandate requires all residents to have health insurance coverage.

Uninsured residents must pay whatever fine is greater: up to $695 per adult and $347.50 per child, or 2.5% of their family income over the federal tax filing threshold. There is a penalty cap of $3,258 per person for households of more than one person. That means a five-person household has a $16,290 penalty cap.

Exemptions, claimed on your tax return or through DC Health Link, are available.

Massachusetts individual mandate

Effective: May 1, 2007

Qualifying Plans: All MCC-compliant plans

Exemptions Available?: Affordable coverage and short gaps only

Tax Penalty?: Yes (Scroll to “Penalties for Tax Year 2021”)

State Health Care Services: Massachusetts Health Connector

Massachusetts has had an individual mandate since 2006, when the state passed—with bipartisan support—its health care reform law. The mandate requires that most residents have Minimum Creditable Coverage (MCC), and all health insurance companies that operate in Massachusetts must mark plans with an MCC-compliance notice. Residents then report coverage on taxes.

The state levies tax penalties for not having health coverage based on income. For families with an income at or below 150% Federal Poverty Level (FPL), individuals must pay $22 per month or $264 for the year. A 300% FPL family, on the other hand, will individually owe $127 per month or $1,524 for the year.

Unlike other states with individual mandates, Massachusetts taxpayers are only required to have healthcare insurance if they can afford it. A detailed affordability schedule is released every year by the state government, detailing what ranges for premiums are considered “affordable” depending on your income bracket.

You’re not penalized if you can’t reasonably purchase an MCC-compliant plan within your specified affordable range. You will be penalized if you could purchase a plan but did not. Besides having a short gap in coverage, this is the only possible exemption to the individual mandate.

New Jersey individual mandate

Effective: January 1, 2019

Qualifying Plans: All Minimum Essential Coverage plans

Exemptions Available?: Yes (through the NJ Health Insurance Mandate Coverage Exemption Application)

Tax Penalty?: Yes

State Health Care Services: Get Covered NJ

The New Jersey Health Insurance Market Preservation Act requires minimum essential health coverage for all qualifying individuals. Uninsured individuals must pay the tax penalty, or Shared Responsibility Payment (SRP). New Jersey bases the SRP on household income and family size. Individual taxpayers can expect to pay anywhere between $695 to $3,492 depending on their situation. Families may pay higher penalties depending on family size.

Possible exemptions include having a low income, experiencing hardship, having a short coverage gap or lacking affordable coverage options. Exemptions must first be claimed using the specific exemption application, then report it on your state taxes.

Rhode Island individual mandate

Effective: January 1, 2020

Qualifying Plans: See “Health Coverage”

Exemptions Available?: Yes (see “Exemptions”)

Tax Penalty?: Yes (see “Tax Penalty”)

State Health Care Services: HealthSource RI

Much like California and New Jersey, the Rhode Island individual mandate requires all non-exempt residents to have health insurance coverage.

Tax penalties are incurred once you file your state taxes, and amount to whichever is higher: $695 per adult and $347.50 per child or 2.5% of your yearly household income. Depending on the type of exemption, you can either claim them on your taxes or through HealthSource RI.

Vermont individual mandate

Effective: January 1, 2020

Qualifying Plans: N/A

Exemptions Available?: N/A

Tax Penalty?: No

State Health Care Services: Vermont Health Connect

Vermont requires all residents over 18 to report health insurance on state taxes, but there is no penalty if you’re uninsured. Because of this, lists of qualifying plans and exemptions to avoid the penalty aren’t applicable.

The Department of Vermont Health Access recommends all residents have health insurance and provides a health insurance marketplace, but at least in policy, the state doesn’t differ from the federal legislature except in requiring yearly coverage reports on taxes.

Why You May Still Need Health Insurance

There are many reasons why it’s important to maintain health insurance. A comprehensive health insurance plan can cover most or all medical and hospital expenses if you’re injured, sick or require an operation. It can also offset costs for preventative care like screenings, check-ups and vaccines that are essential for maintaining your health long-term.

A comprehensive health insurance plan can protect you from shouldering thousands of dollars in fees and potential debt. Some types of health insurance pay qualifying costs upfront; others will offer you reimbursement. Either way, you’re saving a significant amount of money in the event of an expensive emergency, accident or unexpected diagnosis.

Knowing that you or your loved ones won’t go bankrupt from receiving the care you may, quite literally, need to survive is a peace of mind only having a good health insurance plan can bring.

What to Do if You Don’t Have Health Insurance

If you don’t have health insurance, it may seem like a daunting task to navigate the complex bureaucracy of enrolling in a plan. There are plenty of services—and options—to help get you coverage as easily and quickly as possible.

Use the ACA Health Insurance marketplace

The ACA marketplace is a service offering insurance plans for individuals, families and small businesses.

The platform is designed to match you with the best insurance plan for your situation based on several factors, such as income and recent life events. You can view plans that are available for your ZIP code.

Each plan lists all relevant details, such as the deductible, copayments, estimated monthly premiums and the health services covered under the plan. The ACA marketplace can be a way to find affordable health insurance coverage if you qualify for premium tax credits and subsidies. Note that you can only sign-up for a plan during the open enrollment period (usually from November to January for the coming year). You will otherwise need to qualify for a special enrollment period, available due to change in circumstance or life event, such as getting married, having a child and moving out of state.

Use employer-sponsored health insurance

By law, any employer with 50 or more full or equivalent part-time employees must provide at least 95% of these employees with health insurance or face a penalty from the IRS. The group health insurance coverage will also extend to dependents age 26 and younger, and often your spouse. The employer chooses the health plans and pays a large portion of the premius.

Buy health insurance directly from the insurance company

By purchasing coverage directly from a health insurance company, you can cut out the middleman and have the ultimate flexibility in the services, deductibles and premiums you choose.

Private health insurance doesn’t always have to be expensive: since you typically choose a plan based on what services you think you’ll need, if you only need basic coverage, it may end up being a cheaper option than even the health insurance marketplace. While looking into private health insurance can be time-consuming, it is often worth the effort, especially if you are not eligible for any of the other types of health insurance listed above.

Enroll in Medicaid if you qualify

Medicaid is a state and federally-run program responsible for providing low-income individuals, of any age, with health insurance. Depending on the size of your household and your total estimated income for the year, you can receive either free or low-cost health coverage Medicaid at any point during the year. The exact services available under Medicaid depend on your state, but all states guarantee essential health care coverage. You can apply for Medicaid through the Health Insurance Marketplace or your state’s Medicaid agency.

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Frequently Asked Questions

Do you have to be married to share health insurance?

You don’t always have to be married to share health insurance. Domestic partner plans, offered by some insurance companies and the health insurance marketplace, afford your unmarried partner the same health insurance benefits as a spouse in a traditional marriage.

The criteria for a domestic partner depends on the state and insurance company, and potentially—if you’re receiving health insurance through your work—your employer as well. Obtaining a certificate of domestic partnership (or your state’s equivalent), if you’re eligible, is the quickest way to meet the criteria for all involved parties.

If your employer offers you health insurance, do you have to take it?

No, you do not have to take any employer-sponsored health insurance package. Some employers may not even offer coverage or offer it only to a limited number of employees.

Whatever the case, you can opt out for any reason. Perhaps the plan is not comprehensive enough or too expensive or maybe you already have or want private insurance or insurance through your spouse’s employer that you’d prefer to keep. If you choose not to enroll in your employer-provided insurance, however, you are on the hook to personally find and pay for an alternative provider.

How many months do you need health insurance to avoid a penalty?

In the states with individual mandates (except Vermont), you must have qualifying health insurance coverage for nine months out of the year. Short gaps of coverage, typically less than two or three consecutive months, will exempt you from paying the penalty—but you will need to declare it on your state taxes.

At a federal level and for all states without an individual mandate, there are no longer any tax penalties for citizens without health insurance.

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