As of 2019, the Trump administration enacted a new mandate that removed the federal penalty for not having health insurance. However, there are several states and jurisdictions that still have a penalty for those who do not have health insurance. These penalties vary by state or jurisdiction, a few of which will be discussed in further detail below.
Creation of the Affordable Care Act
The Affordable Care Act was enacted in 2010 under the Obama administration with the main purpose to make healthcare insurance available to everyone – regardless of their financial circumstances. The act made healthcare available to nearly 95% of U.S. citizens, increased the availability of healthcare by making insurance mandatory, and assessed financial tax penalties to those without healthcare (in order to help pay for the program). Most importantly, it protected individuals with pre-existing conditions by forbidding health insurance companies from discriminating against them in the form of either massive premium hikes or denial of coverage. The Affordable Care Act also worked to aid young adults, one of the least financially stable populations in America, by allowing children to stay under their parents’ healthcare plan until the age of 26.
What is the Individual Mandate?
The individual mandate is the part of the Affordable Care Act that requires every citizen to have health insurance. If someone did not have health insurance coverage, the mandate imposed a tax penalty on them. But citizens couldn’t just purchase any health insurance plan in order to satisfy the individual mandate. Qualifying coverage had to cover essential care, which is very common among insurance policies obtained through an employer, Medicare, Medicaid, or similarly structured health plans. This mandate was enacted with the goal of allowing equal-access healthcare to every citizen in America. However, the individual mandate was repealed on a federal level by the Trump administration as of 2019.
What Are The Effects of Repealing The Individual Mandate?
Since its implementation, the individual mandate was controversial amongst the public and its repeal was equally debated. Much of the debate surrounding the individual mandate repeal was based on its effects on healthcare premiums. With less people obtaining health insurance, the premiums were expected to become higher for those who needed healthcare and had preexisting conditions. Not only was this controversial financially, but this brought up concerns over the state of health for the U.S. population. The worries about the inflation of premiums were brought to light when premiums for bronze plans increased from 3 percent to 13 percent once the tax penalty was removed. Additionally, enrollment fell from 2.8 million uninsured individuals to 13 million. For these reasons, certain states have chosen to enact their own mandates on health insurance requirements.
Individual State Penalties
Depending on your state of residence, there may be state-mandated health insurance requirements and penalties as a result of the federal individual mandate repeal. Select states have chosen to enact their own penalties and requirements to encourage equal-access healthcare within their jurisdictions. Below are a few states that have created their own penalties and requirements.
Starting in 2020, California has enacted their own individual mandate for the state that requires residents to acquire a healthcare policy or pay a penalty. The penalty is based on the previous federal individual mandate penalty which is $965 per uninsured adult or 2.5 percent of the individual’s household income. As a result, California has managed to keep their healthcare premiums much lower than the national average and encourages their residents to maintain their healthcare coverage.
District of Columbia
As of 2019, the District of Columbia has also signed their own health insurance policy that requires residents to have a qualifying health insurance policy or exemption. The health insurance plan has the same minimum requirements as the previous federal individual mandate, which requires essential coverage. Otherwise, residents must pay a penalty through their city taxes.
Prior to the federal individual mandate and the Affordable Care Act, Massachusetts has had their own individual mandate since 2006. This mandate still remains in effect despite the repeal of the federal individual mandate. The penalty assessed if an individual is uninsured is based on the residents’ income and the cost of plans in the exchange at the time. This penalty was repealed while the federal individual mandate was in action from 2014 to 2018 but has since been reinstated for the 2020 coverage year.
New Jersey enacted their own individual mandate in 2019 after the federal repeal. Their healthcare requirements and penalties follow the same layout as the federal individual mandate did – with the exception that the maximum penalty is in correlation to the average cost of a New Jersey bronze plan instead of the national average.
As of January 2020, Rhode Island has implemented their individual mandate program that is modeled after the federal individual mandate. The same requirements and penalties from the federal mandate are applied to Rhode Island’s new individual mandate system.
Since the start of 2020, Vermont has issued a statewide individual mandate as a result of the federal individual mandate repeal. Vermont’s mandate requires residents to maintain minimum essential coverage as defined by the previous federal individual mandate. However, there is no penalty for those who are uninsured, but those who are uninsured will have to note in their state taxes that they do not reach coverage and the state will then contact and assist them in obtaining coverage.
What Are Possible Exemptions From The Fee?
There are several ways to get exempted from state individual mandate penalties, just as there were possible exemptions for the federal individual mandate. A few common cases that you can be granted an exception for are cases of circumstantial reasoning, including financial status, life events, or hardships. Additionally, most states do not require you to pay a fee for any month you are covered. So if you are only uninsured for a few months of the year, you will only be penalized for those months, in most cases. Make sure to check with your specific state to find out if you qualify for exemption.