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State Health Insurance Mandates and Penalties

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When the Affordable Care Act (ACA) passed in 2010, it included a much-debated requirement called the individual mandate. Part of that mandate said that if you chose not to buy insurance and were not eligible for an exemption, you would be subject to a tax penalty called an individual shared responsibility payment (commonly referred to as the ACA tax penalty) when you filed your federal taxes.[0]

In December 2017, a new tax law was passed eliminating the tax penalty for individuals without insurance.[1]

The Tax Cuts and Jobs Act didn’t actually repeal the individual mandate. Instead, the tax bill set the penalty for noncompliance to zero after Dec. 31, 2018.[2]

Since then, some states have created their own individual insurance mandates to replace the federal version.[3] These mandates require state residents to have qualifying health coverage or pay a fee with their state taxes. While just six states currently have individual mandates, at least four other states have explored this option.

States with state-level individual mandates (as of March 2020):

  • California[4]
  • Massachusetts[5]
  • New Jersey[6]
  • Rhode Island[7]
  • Vermont[8]
  • Washington D.C.[9]

We’ll discuss the individual state mandates in more detail later.

No Individual Mandate in Your State? You May Have Other Health Insurance Options

If you reside in a state that has not enacted a state-level individual mandate and tax penalty, then you won’t pay a tax penalty if you don’t enroll in qualifying minimum essential coverage.

Major medical insurance is still the best option. But if premiums are unaffordable and you don’t qualify for a subsidy, it’s still a good idea to get some level of health coverage for accidents and critical illnesses.

If you require emergency room treatment or hospitalization for several days it can be very difficult to pay out of pocket due to the high costs:

  • $2,233 – Average cost of hospitalization per day (2018)[10]
  • 5.5 days – Average hospital stay duration (2017)[11]
  • Cost of emergency room care can range from $404 to $1,258 for a minor problem[12] to $985 to $3,073 for a very severe problem[13]

Short Term Health Insurance

Short term medical insurance is a type of non-ACA qualifying coverage that provides benefits for covered accidents or illnesses. These types of plans don’t have the level of coverage of major medical plans: they are not guaranteed issue, don’t cover pre-existing conditions or the essential health benefits, so if you enroll in this type of plan you’ll pay for routine healthcare costs out of pocket.

However, you can enroll in these plans anytime during the year if you qualify since they’re not subject to the open enrollment period. And even though they can have relatively high deductibles, premiums are lower because the policies are more restricted in what they cover.

In 2018, the average short term health insurance premium for an individual was $107 per month and $258 for a family.[14]

If you think a short term policy may be right for you or your family, request a quote to compare costs and benefits.

Get a Short Term Insurance Quote

Individual State Mandates – Details

Please note that the materials available at this website are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.


The individual health care mandate, patterned after the ACA, requires Californians to maintain qualifying health insurance coverage. Unless they qualify for an exemption, those who go without coverage could face a penalty of $695 or more for an individual adult.

The penalty for a dependent child is half that of an adult. The penalty for a married couple without coverage can be $1,390 or more, and the penalty for a family of four with two dependent children could be $2,085 or more.[15]

Learn more about California’s health insurance laws and individual mandate.


The Massachusetts Health Care Reform Law requires most residents over 18 who can afford health insurance to have coverage for the entire year or pay a penalty through their state tax returns.[16]

The penalties are based on the number of months in the year that the resident doesn’t have the required health insurance coverage. However, Massachusetts does extend a grace period that allows lapses in coverage of three or fewer consecutive months.

Massachusetts’ penalties vary depending upon income, age and family size, but they can be no more than half of the lowest-priced plan available to an individual through the Massachusetts healthcare marketplace.

State residents must be enrolled in health insurance plans that meet “minimum creditable coverage”[17] requirements, which are similar to the ACA’s essential benefits.

Learn more about Massachusetts’ health insurance laws and individual mandate.

New Jersey

In 2019, New Jersey enacted the New Jersey Health Insurance Market Preservation Act, requiring New Jersey residents to maintain minimum essential health coverage, qualify for an exemption, or pay a penalty.[18]

As in the ACA, New Jersey’s mandate includes a penalty amount as the greater of:

  • 2.5% of modified adjusted gross income, or
  • $695 per adult (adjusted for inflation) and $347.50 per child, capped at three times the threshold regardless of family size or $2,085 (adjusted for inflation).[19]

One difference: The penalty amount is capped at the state average cost for bronze-level plans rather than the federal average.[20]

Learn more about New Jersey’s health insurance laws and individual mandate.

Rhode Island

As of 2020, Rhode Island residents must have qualifying “minimum essential coverage” for each month beginning after Dec. 31, 2019, or qualify for an exemption. The penalty will first apply in early 2021, for Rhode Island resident personal income tax returns covering the 2020 tax year.[21]

The Rhode Island penalty will be announced before the 2021 personal income-tax filing season.[22]

Learn more about Rhode Island’s health insurance and individual mandate.


As of 2020, Vermont has an individual mandate that requires state residents to maintain minimum essential coverage. But there is no penalty for non-compliance. Vermont state tax filers just have to indicate whether they had coverage during the year, and the data will be used to offer assistance to those without coverage.[23]

Learn more about Vermont’s health insurance and individual mandate.

Washington, D.C.

As of 2019, residents of Washington, D.C. must have minimum essential coverage or face a state tax penalty.[24]

As in Massachusetts, “minimum creditable coverage” means meeting the requirements of the ACA. Those who do not carry health insurance will face a tax penalty of $695 per uninsured adult, or 2.5% of household income, whichever is greater.

However, the maximum penalty is tied to the average cost of a bronze plan in D.C., as opposed to the average cost of a bronze plan nationwide. In 2019, that amount was $3,072/year per person.[25]

Learn more about Washington D.C.’s health insurance laws and individual mandate.

Summary + Next Steps

A number of states have passed or are considering their own individual mandates since the federal mandate was effectively eliminated. More states may adopt individual mandates, so make sure to stay up-to-date on the health insurance requirements in your state.

Major medical insurance remains your best option if you want the most comprehensive health benefits available and coverage that adheres to all ACA requirements.

If your state does not have an individual mandate and you want to explore non-ACA coverage options, then you can do so without paying a state or federal tax penalty.

Learn more about other health insurance options like short term medical insurance.

Please note: the materials available at this web site are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

ACA Open Enrollment Resource Guide

Check out the related ACA resources below for more help navigating open enrollment.

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