Is there a penalty for being uninsured?

When enacted, the Affordable Care Act included an individual federal mandate. Most U.S. citizens and legal residents were required to have health insurance—or pay the penalty. This health insurance penalty was in effect in the tax years from 2014 through 2018, when the courts repealed it. They did not repeal the mandate, which remains in effect; however, there is no longer a federal financial penalty for not having insurance, making the mandate effectively unenforceable.  

Is there a penalty for not having health insurance?

Too often, people learn that the personal penalty for not having health insurance is exorbitant healthcare bills. If you fall and break your leg, hospital and doctor bills can quickly reach up to $7,500—for more complicated breaks that require surgery, you could owe tens of thousands of dollars. A three-day stay in the hospital might cost $30,000. More serious illnesses, such as cancer, can cost hundreds of thousands of dollars. Without health insurance, you are likely financially responsible for these bills. Almost two-thirds of people who file for bankruptcy indicate that medical bills contributed to their financial situation, according to a 2019 study. 

The Affordable Care Act increased the number of people with insurance and lowered the number of people who couldn’t afford to pay their health bills. While the federal health insurance coverage mandate and shared responsibility payment were in effect, from 2014 through 2018, the number of people in the United States who had health insurance increased by around 20 million.

“Since 2019, there is no federal penalty for not having health insurance,” says Brad Cummins, the founder and CEO of Insurance Geek. “However, certain states and jurisdictions have enacted their health insurance mandates.” The states with mandates and/or penalties in effect are:

• California
• Massachusetts
• New Jersey
• The District of Columbia
• Rhode Island
• Vermont  

If you do not live in the above states, there is no mandate or penalty for being uninsured.

What is the penalty for not having health insurance?

The penalty amount for not having the minimum essential coverage depends on where you live. Minimum essential coverage, also called qualifying health care coverage, includes 10 essential benefits:

• Outpatient services
• Emergency services
• Hospitalization
• Pregnancy, maternity, and newborn care
• Mental health and substance abuse care
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services
• Pediatric services

There are a variety of health plans that meet these requirements, including catastrophic and high deductible plans. 

California 

California enacted a health insurance mandate on Jan. 1, 2020. Residents can purchase insurance through their employer, on Covered California’s website, or directly through an insurer. Being enrolled in Medicare and Medicaid plans also counts as creditable coverage. 

People without health insurance in California must pay a penalty of $900 per adult and $450 per child. However, residents can claim a coverage exemption for the following situations:

• Household income below the state threshold
• Time without coverage was three consecutive months or less
• Health insurance premiums for the lowest-cost Bronze plan or the lowest-cost plan offered by employer are more than 8.17% of household income
• Member of a health care sharing ministry
• Non-citizens who are not lawful residents 
• Lawful residents of California who live abroad or in another state
• Members of a federally-recognized tribe including Alaskan Natives
• Incarceration
• Enrolled in limited or restricted-scope Medi-Cal coverage or similar coverage

The revenue from the mandate penalty is used to help cover the cost of premium subsidies, which aim to make coverage more affordable.

Massachusetts 

Massachusetts had an individual mandate for people over the age of 18 since 2006, before the Affordable Care Act. They have the lowest uninsured rate in the country. Penalties for not having insurance are dependent on income. The tax penalty can be up to $183 per month or $2,196 per year for individuals.

There are some exemptions to the health insurance mandate, such as people who meet the following criteria:

• Income is below the filing threshold (less than or equal to 150% of Federal Poverty Level)
• Resident of Massachusetts but are living in another state or U.S. territory
• Member of federally recognized Native American tribes
• Incarceration
• Religious conscience exemption
• Financial hardship

New Jersey

The health insurance mandate in New Jersey went into effect on Jan. 1, 2019. If you do not have insurance, the penalty is dependent on your income and family size. Still, the maximum is the statewide average annual premium for a Bronze Health Plan. Some examples of the penalties include:

• For individuals, the penalty ranges from $695 to $3,960
• For a family with two adults and three dependents with an income less than $200,000, the minimum penalty is $2,351, and the maximum is $4,500
• For a family with two adults and three dependents with an income between $200,001 and $400,000, the minimum penalty is $2,351, and the maximum is $9,500

You pay any penalty due when you file your state income tax return. If you do not pay, the state may send you a bill for the penalty. People with any of the following situations can file for an exemption to the penalty:

• Health insurance premiums are more than a set percentage of household income
• Income is below 138% of the federal poverty level
• Gap in coverage was less than three months
• Member of a religious sect that relies solely on a religious method of healing
• Member of a federally recognized tribe
• Incarceration
• Financial or other qualified hardship
• Living abroad or are a non-U.S. citizen
• Member of a healthcare sharing ministry

Washington, D.C. 

The District of Columbia instituted a health insurance mandate beginning Jan. 1, 2019. The penalty in 2024 is $745 for adults and $372.50 for children—up to $2,235 for the family—or 2.5% of family income over the federal tax filing threshold, whichever figure is higher. 

Individuals and families can request an exemption if they meet one of the following situations:

• Income low enough that they aren’t required to file a D.C. tax return
• Financial hardship
• Gap in insurance that was three months or less
• Not a resident of D.C. during the months you did not have insurance
• Enrolled in DC Healthcare Alliance coverage
• U.S. citizen living abroad or not lawfully present
• Membership in a health care sharing ministry
• Conscientiously opposed to health benefits based on religion or a sincerely-held religious belief
• Member of a federally-recognized Indian tribe
• Incarceration

Rhode Island

Rhode Island enacted a health insurance mandate on Jan. 1, 2020. People who do not have health insurance pay either 2.5% of their household income or $695 per uninsured adult and $347.50 per uninsured child, whichever is higher. If using 2.5% of income, the maximum penalty is the cost of the annual premium for the average bronze plan sold through HealthSourceRI.

Exemptions for the penalty include:

• Financial hardship
• COVID hardship
• Coverage is unaffordable
• Member of a recognized religious sect
• Member of health care sharing ministry
• Member of American Indian tribes
• Incarceration
• Premiums more than a set percentage of household income
• Citizens living abroad and some non-citizens

Vermont 

Vermont has a health insurance mandate, which began on Jan. 1, 2020. Residents are required to report their health insurance information on their annual state tax returns. However, there is no financial penalty for not having insurance.

Maryland

Maryland created a new program under the bill SB802 on May 13, 2019 called Easy Enrollment Health Insurance Program. Instead of penalizing residents for not having health insurance, it seeks to gather data on the uninsured via tax returns to help facilitate enrollment in healthcare coverage.

How to avoid paying a penalty for no health insurance

The easiest way to avoid paying a penalty for not having health insurance is to enroll in an accepted and creditable health plan for your state. The Affordable Care Act, sometimes called Obamacare, specifies an Open Enrollment Period when people can enroll in plans offered through the federal or state health insurance marketplaces. An Open Enrollment Period is a set time when people can sign up for or change their plans. When you sign up for health insurance during the open enrollment, the insurer must provide you with insurance. If you do not sign up during this time, you cannot sign up until the next open enrollment unless you experience certain life events. For 2025, open enrollment begins on Nov. 1, 2024, and ends on Jan. 15, 2025. 

Besides plans on the Marketplace, you can sign up for Medicare (if you’re eligible) during two main periods in the year:

• Initial enrollment period
• Open enrollment period

Some people can enroll in health insurance plans offered on the state and federal exchanges during times other than the Special Enrollment Period (SEP), if they experience certain life events, such as:

• Losing health coverage due to divorce or legal separation
• Moving
• Getting married
• Having or adopting a child or placed a child for foster care
• Losing coverage due to domestic violence or a death in the family
• You turned 26 and are no longer on your parents’ insurance

“Depending on your SEP type, you can have either 60 days before or 60 days after the event to enroll yourself in the plan you want,” explains Linda Chavez, founder and CEO for Seniors Life Insurance Finder. “Children can be enrolled in health insurance programs at any time.”

You can usually purchase Medicaid/CHIP, short-term health insurance, individual health insurance directly through an insurer, and some supplemental health insurance programs throughout the year. You should check with the specific insurer to find out their enrollment guidelines.

RELATED: How to get health insurance after open enrollment ends

Saving money on prescriptions when you are uninsured or underinsured 

Most people who go without health insurance do so because of the cost, according to the Kaiser Family Foundation. SingleCare can help you save money on your prescriptions. Many times, using SingleCare provides you with lower prices than if you used your insurance. 

It is easy to find out if you can save money this way. Use either the SingleCare website or app and search for your medication to receive a list of pharmacies and digital coupons for the drug. These prices are based on partnerships between the pharmacies and SingleCare. You often can find your prescriptions for a lower cost than if you walked into the pharmacy without checking or through your insurance.