Is Health Insurance Required in Your State?

Health insurance is required in California, Massachusetts, New Jersey, Rhode Island, Vermont and the District of Columbia. Unless you have a qualifying exemption, you may face a state penalty tax for going without healthcare coverage throughout the year. You will also have to pay for medical treatments out of pocket.

Find out the consequences of going without health insurance plus solutions for obtaining the best health coverage for your needs.

Which States Require Health Insurance?

California, Massachusetts, New Jersey, Rhode Island, Vermont and the District of Columbia require residents to have health insurance.

California Individual Mandate

Effective date: January 1, 2020

Requirements: ACA-compliant health insurance

Penalty: Tax penalty for those who can afford insurance but refuse to purchase a plan

The California tax penalty for health insurance non-compliance is based on the ACA (Affordable Care Act) penalty that ended in 2018. The penalty amount starts at $850 per adult and $425 per dependent child under 18 in the household when you file your 2022 state income tax return in 2023. The penalty can be avoided if there is a qualifying exemption.

Eligible exemptions include:

  • Religious exemption
  • Hardship exemption (e.g., homelessness, eviction, natural disaster, domestic violence or bankruptcy)
  • Affordability exemption
  • Coverage gap was short
  • You are part of a federally recognized Native American nation
  • Incarceration

Massachusetts Individual Mandate

Effective date: January 1, 2006

Requirements:  ACA-compliant health insurance

Penalty: Tax penalty for those who can afford insurance but refuse to purchase a plan

The Massachusetts individual mandate was enacted in 2006. Fortunately, the removal of the federal penalty will no longer subject Massachusetts residents to a double fine. The state penalty fine is based on how much the individual’s income exceeds the federal poverty level (FPL):

Individual

Income

Category

150.1-200% FPL

200.1-250% FPL

250.1-300% FPL

Above 300% FPL

Penalty

$23/month

$276/year

$45/month

$540/year

$67/month

$804/year

$159/month

$1,908/year

The Massachusetts penalty applies to only adults. The penalties imposed through the individual’s personal income tax return will not exceed 50% of the minimum monthly insurance premium an individual would pay through the Health Connector.

Some may qualify for an exemption from the penalty for religious reasons or due to hardship, such as homelessness, eviction, natural disaster, domestic violence or bankruptcy.

New Jersey Individual Mandate

Effective date: January 1, 2019

Requirements:  ACA-compliant health insurance

Penalty: Tax penalty for those who can afford insurance but refuse to purchase a plan

Passed in 2018, Assembly Bill 3380 enforces a penalty on New Jersey residents refusing to purchase health insurance despite having the financial resources to do so. Also called the Shared Responsibility Payment (SRP), the penalty is based on your income and family size and is withheld on your tax return. The maximum penalty is equivalent to the state’s average cost for a bronze plan:

Filing Status

Penalty

Individual taxpayer

Minimum: $695

Maximum: $3,661

Family with two adults and three dependents and household income of $200,000 or below

Minimum: $2,351

Maximum: $4,869

Family with two adults and three dependents and household income of $200,001 to $400,000

Minimum: $2,351

Maximum: $10,279

Family with two adults and three dependents and household income of $400,001 and above

Minimum: $2,351

Maximum: $19,793

New Jersey recognizes eligible exemptions, including:

  • Religious exemption
  • Hardship exemption such as homelessness, eviction, natural disaster, domestic violence or bankruptcy
  • Affordability exemption
  • Coverage gap was short
  • Membership in federally recognized Native American nation
  • Incarceration

Rhode Island Individual Mandate

Effective date: January 1, 2020

Requirements:  ACA-compliant health insurance

Penalty: Tax penalty for those who can afford insurance but refuse to purchase a plan

Rhode Island's individual mandate penalty took effect in 2020. Three methods are used to calculate the penalty amount: flat dollar amount method; percentage of income method and; bronze plan method. Rhode Islanders that do not maintain healthcare coverage can calculate their penalty, using the “Shared Responsibility Sheet” on the Rhode Island website. The maximum penalty is generally $695 per person.

Exemptions in Rhode Island may include:

  • Religious exemption
  • Hardship exemption such as homelessness, eviction, natural disaster, domestic violence or bankruptcy
  • Affordability exemption
  • You are part of a federally recognized Native American nation
  • Incarceration

Vermont Individual Mandate

Effective date: January 1, 2020

Requirements: Residents must report whether or not they have ACA-compliant insurance during the year on their tax forms.

Penalty: NO penalty for non-compliance

Vermont residents must report if they have health insurance when filing their state taxes, including if they have Medicare or Medicaid.

Washington, D.C. Individual Mandate

Effective date: January 1, 2019

Requirements:  ACA-compliant health insurance

Penalty: Tax penalty for those who can afford insurance but refuse to purchase a plan

Residents in the District of Columbia will be fined for not having health insurance. The penalty will be one of the following, whichever is greater:

  1. $700 for each adult and $350 for each child, up to $2,100 per family OR
  2. 2.5% of family income that is over the federal tax filing threshold

Exemptions from the non-compliance penalty include hardship (e.g., homelessness, eviction, natural disaster, domestic violence or bankruptcy) and affordability.

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What Happens if You Don’t Apply for Health Insurance?

The fallout from not having health insurance can be overwhelming and can include state tax penalties, higher out-of-pocket costs and postponing essential healthcare.

  • Higher charges for the same services: Without health insurance, you’re responsible for the full medical bill. If you maintain coverage, your carrier would cover a portion of the cost after your deductible and copay or coinsurance.
  • Medical debt: Consumers may need to resort to a third-party loan or in-house financing to afford their medical care and prescription drugs. The accrued interest adds to their total expense. Currently, around 23 million people have medical debt with 3 million owing over $10,000 in medical bills.
  • State tax penalties: Depending on your state and unless you qualify for an exemption, you may pay a tax penalty for not maintaining health insurance coverage throughout the year.
  • Postponing or neglecting healthcare: The high out-of-pocket cost of medical treatment without health insurance may push consumers to delay seeing a doctor. This could cause certain diseases to go undiagnosed and potentially worsen over time.

How Do You Avoid the Individual Mandate Tax?

Maintaining health coverage throughout the year or looking into healthcare subsidies or Medicaid if it’s too expensive can help you avoid the individual mandate tax.

Get health insurance when it’s available. Open enrollment occurs once a year, starting  November 1 and ending January 15 in most states. If you forget to buy insurance during open enrollment, you can still purchase it during a special enrollment period if you experience a qualifying life event (e.g., getting married, moving addresses, having a child).

Look into subsidies. If healthcare insurance is still too expensive, see if you qualify for subsidies that will lower your premium payment. For example, the premium tax credit reduces monthly payments for plans purchased through the Healthcare Marketplace. To qualify, an enrollee must:

  • Have a household income at least equal to the Federal Poverty Level (FPL)
  • Not having health coverage through an employer
  • Not be eligible for coverage through Medicare, Medicaid or the Children’s Health Insurance Program (CHIP)
  • Have U.S. citizenship or proof of legal residency
  • Must file taxes jointly, if married

Get Medicaid. Low-income families, qualified pregnant women and children and individuals receiving Supplemental Security Income (SSI) are groups that every state is mandated to allow access to Medicaid coverage. Other eligibility requirements will vary by state. The cost of coverage will depend on your income and where you live. However, what you pay for Medicaid will be substantially lower than a healthcare plan from the marketplace.

What Should You Do if You Don’t Have Insurance?

You have several options if you don’t have health insurance, such as buying insurance through the ACA marketplace, joining your employer’s group plan or enrolling in your state’s healthcare subsidy program.

Get Health Insurance From the Marketplace

The best thing you can do is to purchase health insurance when it’s available through the marketplace. Open enrollment is November 1 through January 15 for most states. Go to your state's health marketplace page and find coverage that will meet your medical needs and won’t break the bank.

Use Employer-Sponsored Health Insurance

Many employers will offer health insurance coverage to their employees. Take advantage of this benefit when it's available and find healthcare that fits your situation.

Buy Health Insurance Directly From the Insurance Company

Many of the major insurance companies offer healthcare coverage any time of year, regardless of when open enrollment occurs. If you missed the enrollment deadline, find a healthcare provider that sells individual plans directly to consumers.

Enroll in Medicaid if You Qualify

Medicaid gives health insurance coverage to low-income families, qualified pregnant women and children and individuals receiving Supplemental Security Income (SSI). See if you qualify and get the healthcare you need.

How Do You Choose the Best Health Insurance Plan?

The best health insurance plan depends on your needs and financial situation. Healthcare plans are traditionally broken up into tiers; bronze, silver, gold and platinum.

Bronze will have the lowest monthly premiums and highest deductible, while platinum will have the highest monthly premiums and lowest deductible. The tier does not determine the quality of care.

If you foresee yourself using your coverage regularly, get a plan with a low deductible and higher premium payments. If you don’t anticipate having a lot of health-related issues in the coming year, get a plan with low premium payments and a higher deductible.

Why is Health Insurance Important?

Health insurance helps everyday consumers access medical care at a price they can afford. Both the consumer and the insurance company split the bill — the consumer pays a monthly premium and out-of-pocket costs (e.g., deductibles, copays) and the carrier covers the remaining invoice balance. With medical care made more affordable, consumers can access the treatment they need, including:

  • Emergency services
  • Hospitalization
  • Pregnancy, maternity, and newborn care
  • Counseling and psychotherapy
  • Prescription drugs
  • Preventive and wellness services and chronic disease management
  • Oral and vision care

FAQs

Is there a fine for not having health insurance?

There is no financial penalty for not having health insurance at the federal level or for most states. However, residents in California, Massachusetts, New Jersey, Rhode Island, Vermont and the District of Columbia must pay a fine if they do not maintain healthcare coverage (unless they qualify for an exemption).

How much does health insurance cost?

The cost of health insurance will vary widely depending on your age, health history, insurance company and plan type.

What happens if you get sick and don’t have insurance?

If you don’t have insurance when you get sick, you will pay out-of-pocket for any medical services you receive.

Key Takeaways

  • Residents in California, Massachusetts, New Jersey, Rhode Island, Vermont and the District of Columbia pay a tax penalty if they do not maintain health insurance.
  • Vermont requires health insurance but does not enforce a tax penalty for residents who do not comply.
  • Individuals may be exempt from the state penalty for religious or hardship reasons or incarceration.
  • The tax penalty for not having health insurance was removed at the federal level.

Health insurance can help you access the medical care you need at a price you can afford. Enter your zip code below or call 855.214.2291 to receive free health insurance quotes from agents in your area offering the lowest rates.

Sources

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