Key Takeaways:

• The Affordable Care Act (ACA) originally included the individual mandate, which required people to have health insurance meeting certain standards.
• Failure to have minimum essential coverage could result in a shared responsibility penalty, although this penalty was eliminated in 2018.
• While the federal penalty is gone, some states still require health insurance, and individuals may face state-level tax penalties for inadequate coverage.

Understanding the Health Care Reform

Both houses of Congress decided in 2017 to repeal the shared responsibility penalty, effective in 2019, as a part of the tax reconciliation act. The last year ACA’s shared responsibility tax penalty had to be paid to the federal government was on tax returns for the tax year 2018. The 2018 open enrollment period, during which people bought health insurance to cover them for 2019, was the first time in a couple of years that taxpayers did not have to worry about getting an ACA-compliant plan with minimum essential coverage, or else face a tax penalty the following year.

So, is it illegal to not have health insurance since there is no longer a fine? On a federal level, having health insurance is no longer a legal requirement. However, a handful of states in the U.S. require citizens to obtain coverage or pay a tax penalty.

People buy health insurance for protection against the risk that they may get sick or injured. When you sign on to an insurance plan, your premium is being paid to a health insurance company (also called carrier or provider). These carriers expect some people receive medical treatment worth more than the monthly premiums they paid, while others receive less than what they paid. Or in other words, some people get more out of their insurance plan, because they require more medical care, and therefore cost the insurance company more money.

Individual mandate

In order for the insurance company to have enough money to pay for its customers’ claims, there have to be more people on the plan who are healthy than there are people who are unhealthy. If everyone on the plan had major illnesses or injuries and ran up expensive medical bills, the insurance company might not have enough money to pay all the claims.

The problem is that people who are sick are generally more likely to want to buy insurance than people who are young and relatively healthy. Before the Affordable Care Act, insurance companies solved this problem by screening applicants and refusing to insure people who were more likely to have expensive medical issues because they had pre-existing conditions.

In order to avoid leaving sick people with few options, the ACA mandated that insurance companies must accept everyone who applied, even those with pre-existing conditions.

Do You Need to Have Health Insurance?

There currently is no federal law that makes health insurance a legal requirement. However, a few states across the U.S. make it mandatory to have healthcare coverage. If you live in a state where having health insurance is the law, you will have to pay a tax penalty for not complying.

Despite the ACA’s individual mandate being revoked and no longer having to pay a fine for lack of health insurance, having some type of coverage is still important. Health insurance can help you avoid hefty medical expenses and ensure you care for your health before certain conditions become much more severe. 

Is There a Penalty for Not Having Health Insurance?

No there is not a penalty for not having health insurance, as it was repealed in 2018. However, the penalty for not having health insurance was substantial before it was repealed. If you didn’t qualify for an exemption, you incurred a fine of $695 per uninsured adult and $347.50 per uninsured child.

Alternatively, if you didn’t have a qualifying health insurance plan, the federal government could charge you a fine of 2.5% of household income above the tax filing requirement. When you filed your tax return, you faced the larger of these two penalties.

Health Insurance Coverage Imposed by State

In many cases, the answer to the question, “Is health insurance mandatory?” varies based on where you live. When researching whether or not health insurance is required, you need to look at the laws in your specific state. 

For example, the penalty in California is at least $800 for adults and $400 for children as of 2022. So, a couple with two children in California could face a penalty of $2,400 for not having health insurance. This is slightly less than the cost of health insurance nationwide, but it is close to the nationwide average.

California is not the only state that mandates health insurance. If you live in any of the following states, you must have health insurance or pay a fine if you don’t have coverage.

• Massachusetts 
• New Jersey 
• Vermont
• Rhode Island 
• Washington D.C.

What Options Are There for Health Insurance Coverage

There are many different options for health insurance coverage. Although the tax reform eliminated the shared responsibility penalty, it kept other aspects of the Affordable Care Act intact. For example, you can still look for plans on the federal health insurance marketplace. Moreover, if your income qualifies, you can get tax credits to offset the premiums you pay to your insurance company.

The Department of Health and Human Services also administers Medicaid and Medicare. Low-income families may qualify for Medicaid, but the rules vary from state to state. Those age 65 and older who meet the criteria are eligible for Medicare.

A wide variety of health insurance plans are also designed for people’s different needs. For instance, there are plans with low premiums and high deductibles for people who want coverage just in case an emergency strikes but don’t want to pay a lot out of pocket. There are also plans that have high premiums in exchange for low co-pays and deductibles. Plans designed for traveling to foreign countries, families, individuals, and short-term health insurance are also available.

In most cases, you must enroll in a health insurance plan during the open enrollment period. However, if you have a qualifying event, such as losing coverage, changing jobs, or welcoming a new family member, you may be able to sign up during a special enrollment period designed for that event.

If you need help selecting a health insurance plan for you and your family, eHealth is here to support you. Regardless of your income or specific circumstances, our vast selection of plans makes it easy to find exactly what you’re looking for. Explore our affordable individual and family health insurance options from leading health insurance providers and ensure your health is covered.