In 2010, the then President of the USA, Barak Obama signed the Affordable Care Act into law that changed the outline of health insurance. One key element of this historical healthcare law was the “individual mandate.” This mandate required almost all Americans to have health insurance coverage. However, since 2019, Obamacare’s individual mandate is no longer applies at the federal level. Since then, in most states, personal health insurance is not mandatory. But for 5 states and the District of Columbia health insurance is mandatory because these states have an individual mandate at the state level.
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- 1 Health Insurance In The USA
- 2 Is There A Penalty For Not Having Health Insurance In The USA?
- 3 FAQs About Is It Illegal Not To Have Health Insurance In The USA
Health Insurance In The USA
People buy health insurance to provide protection for their health during an accident, sickness, etc. The Affordable Care Act was introduced to ensure people have minimum health care coverage and it was known as the “individual mandate.” But, from 2019, this law is not applicable at the federal level but you may have to pay a penalty for not having health insurance if you live in one of the following states –
2. New Jersey
5. Rhode Island
6. District of Columbia (Washington D.C.)
1. Massachusetts Individual Mandate
This individual mandate was first introduced on January 1, 2006, and people require ACA-compliant health insurance according to this mandate. In the USA, Massachusetts has the highest levels of insurance coverage and it is as high as 97.5%. The Massachusetts individual mandate predates the Affordable Care Act and Obamacare individual mandate. The penalty of this mandate varies depending on income, age and family size, etc. According to Mass.gov, the penalty of Massachusetts Individual Mandate works like –
1. If you’re a Massachusetts resident and go without insurance because you can’t afford the plans available to you, you won’t be penalized. You also won’t be penalized if your income is at or below 150% of the federal poverty level.
2. If you owe a tax penalty, the amount varies by income, age, and family size.
3. The tax penalty cannot be more than 50% of the least expensive plan premium that you would have qualified for through Health Connector, the Massachusetts health insurance exchange.
2. New Jersey Individual Mandate
The New Jersey individual mandate first came into the act on January 1, 2019. It also requires individuals and their dependents living in New Jersey to have ACA-compliant health insurance. So, if you are a resident of New Jersey and if you can afford to have health insurance but you can’t buy insurance then you will be penalized. The penalty is also known as the Shared Responsibility Payment and it is based on household income as well as the size of the family. Though, the penalty is limited to the cost of the average statewide premium for bronze health insurance plans. According to NJ.gov, the minimum penalty is $695 and the maximum penalty is $3,012 for the 2021 tax year. On the other hand, for a family of five members with a minimum yearly income of $200,000 or below the minimum tax penalty is $2,351 and the maximum tax penalty is $5,074. However, if you are exempt from filing a tax return then you won’t have to pay the penalty.
3. Vermont Individual Mandate
This mandate came into effect on January 1, 2020, and residents of Vermont are required to self-report whether or not they have ACA-compliant insurance in the 2021 tax forms. So, if you live in Vermont then you have to report whether you have health insurance or not in the tax form. If you don’t have any insurance then unlike other states with the mandate, you won’t be penalized for it. However, no guaranty there will not be a penalty in the future. So, if you live in Vermont and don’t have health insurance then always keep your eyes open for new rules.
4. California Individual Mandate
California Individual Mandate was first introduced on January 1, 2020, and according to this mandate, it is a requirement for California residents to have ACA-compliant health insurance. So, if you can afford health insurance but don’t have one then you will be penalized. In 2021, the annual penalty for California residents is 2.5% of household income or at least $750 per adult and $375 per dependent under 18, whichever is greater. Moreover, the penalty is capped at the state average premium for a bronze-level plan and it won’t apply if the premium exceeds 8.3% of household income. In California, you might be eligible for an exemption under the below circumstances –
Religious Conscience Exemption: If you or any of your family members are a part of recognized religion and he/she is against private insurance or believes exclusively in spiritual healing then you may qualify for a religious conscience exemption.
Hardship Exemption: If you have experienced certain hardships that are preventing you from getting health coverage then you can be eligible for a hardship exemption. For example – homelessness, eviction, natural disaster, domestic violence, etc.
Affordability Exemption: If the tax penalty is greater than 8.27% of your household income in 2021 then you will qualify for an affordability exemption.
Short Coverage Gap: If you have gone without insurance coverage for three consecutive months or less then you will qualify for a tax penalty exemption.
Native American Tribe: If you are a part of a federally recognized Native American tribe then you will be eligible for a tax penalty exemption.
5. Rhode Island Individual Mandate
This mandate was first introduced on January 1, 2020, and it also requires individuals and their dependents to have ACA-compliant health insurance. According to this mandate, if you can afford but don’t have health insurance then you will be penalized. In Rhode Island, the penalty for not having ACA-compliant health insurance is the same as was under the federal individual mandate. The tax penalty will cost a family $695 for each uninsured adult and $347.50 for each uninsured child or 2.5% of the household income, whichever amount is greater. Like California, Rhode Island allows for exemptions in certain circumstances. Recently Rhode Island introduced a COVID hardship exemption and you might be able to become eligible for COVID hardship exemption if you have –
1. Lost minimum essential coverage in 2020, or
2. Experienced a hardship that made you unable to get minimum essential coverage in 2020
6. Washington D.C. Individual Mandate
If you live in Washington D.C. and go without qualifying health coverage for a full year then you might owe a tax penalty. This mandate first came into effect on January 1, 2019, and according to the mandate you and your family members must have ACA-compliant health insurance. If you don’t have health insurance then you can be penalized either 2.5% of the gross family household income or $695 per individual and $347.50 per child, which amount is greater.
Is There A Penalty For Not Having Health Insurance In The USA?
In the USA, currently, there is no federal penalty for not having health insurance. So, it means, if you don’t have insurance then you won’t have to pay any penalty fees when paying the taxes. However, there are some states available where they have implemented their mandates so few states have a penalty for not having health insurance. So, if you live in any of the five states then you must have health insurance to avoid penalties. So, penalty fees are still applicable for years where the ACA was law and if you were uninsured and didn’t qualify for penalty exemptions.
FAQs About Is It Illegal Not To Have Health Insurance In The USA
Who Is Exempt From The Health Insurance Mandate?
Many people can be exempt from the insurance mandate and it includes –
1. Incarcerated individual
2. People with low income and can’t afford health insurance
3. Members of a Native American tribe
4. Member of a religion that objects to health insurance
5. Member of a healthcare sharing ministry
6. Living in the USA illegally
7. Individuals qualified for a hardship exemption, etc.
Will I Get In Trouble For Not Having Health Insurance In 2021?
No, you won’t get in trouble for not having health insurance in 2021 because the federal tax penalty for not having health insurance was eliminated in 2019 by the Trump Administration.
What Is The Patient Protection Act?
The main purpose of the patient protection act is to protect basic patient rights and help the patient access healthcare facilities conveniently. The patient protection act further works to help people with low incomes.
Do I Need To Show Proof Of Health Insurance For My Taxes?
If you haven’t filed your taxes for the 2018 fiscal year then you have to show proof of health insurance for the taxes. You have to show one of the following documents –
1. Form 1095-A (Health Insurance Marketplace Statement)
2. Form 1095-B (Health Coverage)
3. Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)
Is There A Penalty For Not Having Health Insurance In 2019, 2020, Or 2021?
No, there is no penalty for not having health insurance in 2019, 2020, or 2021. This is because as of Jan. 1, 2019, the Obamacare individual mandate is no longer applies at the federal level. However, if you live in Massachusetts, New Jersey, Vermont, California, Rhode Island, District of Columbia (Washington D.C.) then you have to pay a penalty for not having health insurance.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.