Health Insurance Mandate

The Mandate Still Exists, But Has No Penalty for Non-Compliance

President Obama Delivers Statement On The Affordable Care Act In The Rose Garden WASHINGTON, DC - APRIL 01: U.S. President Barack Obama speaks on the Affordable Care Act with Vice President Joe Biden in the Rose Garden of the White House April 1, 2014 in Washington, DC. More than 7 million Americans signed up for health insurance through the final day of eligibility of the national health care law.
U.S. President Barack Obama speaks on the Affordable Care Act with Vice President Joe Biden in the Rose Garden of the White House April 1, 2014 in Washington, DC. Win McNamee/Getty Images

One of the more controversial parts of the Affordable Care Act is the issue of a health insurance mandate – the requirement that all Americans must have healthcare coverage.

The vast majority of people in this country have health insurance through work or a public plan such as Medicare and Medicaid, and that was already the case prior to 2014 when the individual mandate took effect. The mandate, therefore, targeted the portion of Americans who did not have health insurance.

Although the federal individual mandate still exists, there is no longer a penalty for non-compliance. The penalty, which was assessed on tax returns for tax years 2014-2018, was reduced to $0 as of 2019 under the Tax Cuts and Jobs Act.

States That Have Their Own Individual Mandates

Although there is no longer a federal penalty for being uninsured, some states have established their own individual mandates and are imposing penalties for non-compliance through their state tax systems.

Massachusetts has had an individual mandate since 2006. The state didn't impose penalties from 2014 through 2018, since uninsured residents were subject to the federal penalty instead. But Massachusetts reinstated its own penalty as of 2019.

New Jersey created an individual mandate that took effect in 2019, and so did DC. In both cases, there are penalties for non-compliance.

Starting in 2020, California and Rhode Island will also have individual mandates and penalties for non-compliance. Vermont has created an individual mandate that will take effect in 2020, but they have not yet created a penalty to go along with it—that might come at a later date, but it won't apply in 2020.

Must I Have Health Insurance?

From 2014 through 2018, all lawfully-present U.S. residents were required to have "minimum essential coverage," which includes coverage through your job, a government plan (such as Medicaid, Medicare, or CHIP), or a health plan you have purchased on your own. But it does not include "excepted benefits" like short-term health insurance, accident supplements, fixed indemnity plans, or critical illness plans.

If you didn't have health insurance during those years, you had to pay a tax penalty unless you were eligible for an exemption from the penalty. The IRS reported that while 6.5 million tax filers owed a penalty for being uninsured in 2014, another 12.7 million tax filers were exempt from the penalty, despite being uninsured.

Now that there's only a penalty for being uninsured in a handful of states, most Americans can choose to forego coverage without facing a penalty on their tax returns. But even when the penalty applied nationwide, it paled in comparison to the challenges people faced if they chose to go without health insurance and then found themselves needing significant medical care.

Because enrollment windows for health insurance—including employer-sponsored plans as well as plans that people can purchase on their own—are limited to just a few weeks per year, it can be difficult or impossible to sign up for coverage mid-year (if you have a qualifying event, you can enroll—but a need for medical care is obviously not a qualifying event).

So going without coverage is a risky proposition, and could leave you without realistic access to medical care when you need it most. It's true that emergency rooms cannot turn you away due to lack of insurance, but they're only required to assess your condition and stabilize you—they don't have to provide any further treatment if you're unable to pay for it.

Making Coverage Affordable: Subsidies & Medicaid Expansion

In addition to requiring people to maintain coverage, the ACA included some important provisions to ensure that coverage would be affordable for most Americans.

Medicaid expansion

Starting in 2014, Medicaid was expanded under the ACA to households with incomes up to 138% of the federal poverty level (that's roughly $17,200 for a single individual in 2019). This was an essential part of making coverage available to low-income Americans, but a landmark 2012 Supreme Court ruling made Medicaid expansion optional for the states, and as of 2019, about a third of the states still have not expanded Medicaid. This creates a coverage gap: Non-disabled adults in those states with income below the poverty level are not eligible for premium subsidies in the exchange or Medicaid, which makes coverage essentially out of reach.

Premium subsidies and Cost-Sharing Reductions

If your yearly income is higher than 138% of the federal poverty level but doesn't exceed 400% of the poverty level (for 2020 coverage, that's almost $50,000 for an individual), you will likely qualify for a premium tax credit to help you pay your health plan’s premiums. And if your income doesn't exceed 250 percent of the poverty level, there's also a subsidy available to lower your out-of-pocket expenses.

The premium subsidy can either be paid directly to your insurer, or you can opt to claim it on your tax return. It's a refundable tax credit, so you'll receive it even if you do not owe any income taxes. 

If I Buy Insurance, Can a Health Plan Turn Me Down If I'm Sick?

No! (unless you buy a plan that's not subject to the ACA's requirements, such as a short-term health plan or fixed indemnity plan). All individual market plans became guaranteed-issue as of January 2014. Enrollment is limited to the annual open enrollment window that starts each fall on November 1, or a special enrollment period triggered by a qualifying event, but insurers no longer ask about medical history when you apply for coverage. Pre-existing conditions are covered on all plans now, except grandfathered individual market plans and, of course, plans that aren't subject to the ACA's regulations at all.

Do I Have to Pay Higher Taxes Because of Health Reform?

Effective January 1, 2013, individuals who earn more than $200,000 a year or couples earning more than $250,000 a year—about 2% of Americans—began to see an increase in their income-related taxes, including:

  • An extra charge of 0.9% for Medicare Part A hospital insurance, an increase from 1.45% to 2.35%. For example, if you are an affluent family with an annual income of $350,000, you're paying an additional $900 a year in Medicare taxes.
  • A 3.8% Medicare tax on unearned income such as capital gains, dividends, and royalties. Previously, Medicare taxes were only assessed on earned income, such as salary from your job or revenue from self-employment.

However, there are some tax-related issues that affect a greater number of people. These include:

  • The tax penalty for not having health insurance that applied from 2014 through 2018.
  • Some changes to how you manage a health savings account (HSA). Since January 1, 2011, you can no longer be reimbursed on a tax-free basis for the costs of over-the-counter medications. And the tax on distributions from your HSA (prior to age 65) that are not used for qualified medical expenses increased from 10% to 20%.
  • If you itemize income tax deductions on Schedule A, the threshold for the itemized deduction for your medical expenses has increased from 7.5% of adjusted gross income to 10% of adjusted gross income. So for example, if your adjusted gross income is $80,000, you can only deduct medical expenses that exceed $8,000, whereas, in the past, you would have been able to deduct medical expenses that exceeded $6,000.
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Article Sources

Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial policy to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. H.R.1 Tax Cuts and Jobs Act.

  2. Health care reform for individuals.

  3. Official Site of the State of New Jersey. New Jersey Health Insurance Market Preservation Act.

  4. Government of the District of Columbia. Office of the Chief Financial Officer. Office of Tax and Revenue. OTR Notice 2019-04. August 9, 2019.

  5. Mercer. California Individual Health Coverage Mandate Includes Employer Reporting. July 16, 2019.

  6. Rhode Island Department of Revenue Division of Taxation. Summary of Legislative Changes. August 5, 2019 

  7. Koskinen, John, Internal Revenue Service, Preliminary results from the 2016 filing season related to Affordable Care Act provisions as of December 2016. January 9, 2017.

  8. Kaiser Family Foundation. Status of State Action on the Medicaid Expansion Decision. September 20, 2019.