Skipping health insurance can cost you more than just out-of-pocket medical bills. While the federal penalty for being uninsured no longer applies, a growing number of states have enacted their own individual mandate laws — and the fines can be substantial.
Here is what you need to know about health insurance penalties, which states still enforce them, and how to stay covered without breaking the bank. If you’re wondering about the legal side specifically, our companion guide on whether it’s illegal to not have health insurance covers the state-by-state requirements in detail.
Disclaimer: This article is for educational purposes only and does not constitute personalized insurance or tax advice. Consult a licensed insurance broker or tax professional for guidance specific to your situation.
What Was the Federal Individual Mandate?
The Affordable Care Act (ACA), passed in 2010, required most Americans to maintain qualifying health coverage or pay a tax penalty — known as the individual shared responsibility provision. The penalty was $695 per uninsured adult or 2.5% of household income, whichever was greater.
The ACA also achieved measurable results: the rate of uninsured Americans fell from roughly 15% in 2013 to about 10.9% by the end of 2016.
In late 2017, Congress repealed the federal penalty. People uninsured in 2018 still owed it; starting in 2019, the federal-level fine dropped to $0. However, several states stepped in to fill the gap with their own mandates.
State-Level Health Insurance Penalties
Massachusetts
Massachusetts has required residents to maintain health coverage since 2006 — predating the ACA. Penalties are tied to the Federal Poverty Level (FPL):
- Residents earning at or below 150% of the FPL are exempt.
- Those earning between 150.1% and 200% of the FPL and uninsured may owe half the cost of the lowest-priced plan on the state marketplace.
- Those earning 300% of the FPL or more may owe based on half the lowest bronze-plan premium.
Married couples add their individual penalties together.
New Jersey
New Jersey enacted a state-level mandate effective 2019 to replace the lapsed federal penalty. Residents without qualifying coverage pay a monthly penalty. As a benchmark, the minimum annual penalty per person is $695; for a family of five with a household income under $200,000 the penalty ranges from roughly $2,085 to $9,500. Residents not required to file a state tax return are exempt.
Washington D.C.
D.C.’s mandate also took effect in 2019 as part of its “Get Covered, Stay Covered” campaign. Uninsured residents pay the higher of $2,085 per uninsured household member or 2.5% of household income. Exemptions exist for financial hardship, eviction, pregnancy, and other qualifying circumstances.
California
California’s mandate, effective 2020, is designed to keep exchange premiums lower for all residents. Uninsured Californians who can afford coverage owe the higher of $900 per adult (adjusted annually for inflation) or 2.5% of household income.
Rhode Island
Rhode Island enforces a penalty similar to Washington D.C.’s structure: $2,085 per uninsured person or 2.5% of household income, whichever is greater.
Vermont
Vermont’s legislature passed a mandate in 2018, but the law does not yet specify a financial penalty. Residents are expected to maintain coverage; a working group has been tasked with developing enforcement recommendations. As of now, there is no active fine for being uninsured in Vermont.
Minimum flat penalty per uninsured person, by state or jurisdiction
How to Avoid Health Insurance Penalties
Open Enrollment and Special Enrollment
The most straightforward way to avoid a penalty is to enroll in a qualifying plan during the annual open enrollment period (typically November 1 through January 15 for most ACA-marketplace states). If you lose coverage mid-year, you may qualify for a special enrollment period — usually a 60-day window after a qualifying life event such as job loss, marriage, or the birth of a child.
Three Coverage Options If You Are Uninsured
1. Subsidized Marketplace Health Insurance
If your income falls within certain thresholds, you may qualify for federal premium tax credits (which can reduce your monthly premium to as little as $1) or cost-sharing reductions that lower deductibles, coinsurance, and out-of-pocket maximums. Your modified adjusted gross income (MAGI) determines your eligibility.
2. Short-Term Health Plans
Short-term plans can bridge a gap in coverage but typically do not meet ACA minimum-essential-coverage standards. They often exclude pre-existing conditions and may last only a few months. Use them only as a stopgap — for example, while waiting for employer coverage to begin or for Medicare eligibility — not as a long-term solution.
3. Medicaid
Medicaid provides free or low-cost coverage for low-income individuals, families, children, pregnant women, seniors, and people with disabilities. Eligibility depends on your income and the state you live in. The Healthcare.gov Medicaid page can help you determine whether you qualify.
If You Are Employed
Most employers that offer group health insurance will walk you through enrollment when you are hired. Review the Summary of Benefits and Coverage (SBC) document carefully so you understand your premium, deductible, and out-of-pocket maximum. If your employer’s plan is expensive for the coverage offered, you may be eligible to shop the marketplace instead — check with a licensed broker to compare.
If You Are Self-Employed
Self-employed individuals can shop ACA marketplace plans directly. A Health Savings Account (HSA) paired with a high-deductible health plan lets you set aside pre-tax dollars for medical expenses, effectively reducing your taxable income while building a cushion for future health costs.
If You Own a Business
Under the ACA, businesses with fewer than 50 full-time-equivalent employees are not required to offer health coverage, though they can access small-group plans through the SHOP marketplace. Businesses with 50 or more full-time employees (Applicable Large Employers) that do not offer affordable minimum-essential coverage may face employer shared responsibility payments.
For Retirees
If you retire before Medicare eligibility (age 65), consider:
- Retiree health benefits from your former employer, if available.
- COBRA continuation coverage — this extends your workplace plan for up to 18 months, though you pay the full premium.
- ACA marketplace plans with potential subsidy eligibility based on your retirement income.
- Your spouse’s employer-sponsored plan, if applicable.
Key Takeaways
- The federal individual mandate penalty no longer applies (for coverage years 2019 onward).
- California, Massachusetts, New Jersey, Rhode Island, and Washington D.C. all impose active state-level penalties for being uninsured without a qualifying exemption.
- Open enrollment, Medicaid, and marketplace subsidies are your primary tools for staying covered affordably.
- Short-term plans can fill gaps but do not count as qualifying coverage in states with active mandates.