Having health insurance isn’t just a good idea. If you live in California, it’s generally required by law. In 2020, California introduced its individual mandate, requiring most residents to have health insurance or qualify for an exemption to avoid a tax penalty.
Here’s what you need to know about the individual mandate.
Federal Law & the Affordable Care Act
The Patient Protection and Affordable Care Act (Obamacare) passed in 2010 with the mission of making quality health care more accessible and affordable nationwide. There were two key points of this act. First, people could no longer be denied or charged more for health insurance due to pre-existing conditions. Second, a federal individual mandate was established, which meant that having health insurance that meets specific conditions – known as minimum essential coverage – was a requirement under law.
These two parts of the law worked together. By encouraging more people to get health insurance, including younger and healthier people, the goal was to spread costs across a larger group and help keep premiums more affordable.
That changed in 2019 when the federal tax penalty for going without health insurance was reduced to $0 via the Tax Cuts and Jobs Act. While the federal individual mandate technically remains in place, you no longer face a federal tax penalty for going uninsured. However, some states, including California, have their own health insurance requirements.
California's Individual Mandate
In 2020, California became one of 5 states (plus Washington, D.C.) to implement its own individual mandate. The logic was the same as the federal individual mandate: The more people who have health insurance, the lower the cost of health insurance for everyone. This also decreases the number of uninsured treatments all residents wind up having to help pay for. When people who don’t have insurance go to the emergency room and can’t pay the bill, costs of treatments may go up for everyone — and taxpayers often have to pitch in to make up the difference. And like federal law under Obamacare, California defined minimum essential coverage the exact same way.
California's Health Insurance Penalty
The individual mandate means that Californians must either have qualifying health insurance, or pay a penalty when filing their state tax return unless they qualify for an exemption.
How much? That depends on your household income, how many people are in your household and how long you went without coverage. California calculates the penalty using either a flat amount per person or a percentage of your household income, whichever is greater.
Penalty amounts can change each year, so check the California Franchise Tax Board for the latest figures.
More Financial Help for Californians
Worried about the cost of health insurance? Financial help is available through Covered California to make coverage more affordable.
Depending on your income and the plan you choose, you may also qualify for help lowering what you pay when you get care. That can mean smaller deductibles, copays and other out-of-pocket costs for things like doctor visits, prescriptions and emergency care.
How much financial help you can get depends on your income, household size and other factors. In fact, 4 out of 5 Covered California enrollees get financial help.
There are plenty of reasons to have health insurance, and avoiding a tax penalty is just one of them. Check our Shop and Compare tool to see what financial help you qualify for, explore your health plan options, and find coverage that fits your needs and budget.
