Are there penalties for not having health insurance?

To insure or not insure?

The first of these questions is very easy to answer.  No federal mandate forces you to have health insurance-so the choice is yours. 

If you are looking for the answer to this question, it may be because you are approaching enrollment as an individual for the first time, e.g., reaching 26 coming off a ‘student health plan’ or coming off an employer-sponsored plan.

As we pointed out at the beginning of this article, you are not legally required to sign up for personal health insurance.  But, before turning the other two questions, we should explain the reason for a lasting confusion over the legal requirement for health insurance.

When first enacted (2014), the Affordable Care Act ( AKA Obamacare) made it mandatory for all US citizens to have health insurance that met the Minimum Essential Standard.  If you had no coverage or there were gaps in your coverage, you could be penalized.  Before January 2019, you would have been liable for the fee payment known as the ‘shared responsibility payment.’ (see below)

The purpose of the ‘shared responsibility payment’ was to encourage all US citizens to have continuous healthcare insurance coverage and not only when they anticipated a specific need.

Now the second question-Are there penalties for not having health insurance?

As of 2021, there are no federal financial penalties for being uninsured.  Just four states, Massachusetts, New Jersey, California, Rhode Island, and the District of Columbia, enforce penalties non-compliance.

Vermont and Maryland have individual mandates but have not implemented any penalties.

If you are now seeking an ACA-compliant plan and did not have MEC coverage in 2018 ( the last year in which the individual mandate applied), you may be liable for a tax penalty.  It would be best if you did not regard this as a deterrent.  The penalty is pro-rated and averages about $200-far less than the value of an ACA compliant policy’s tax and security benefits.

To insure or not to insure? That is the most critical question.

Over ninety percent of US citizens have health insurance coverage (KFF).  Nearly half of us are insured on plans sponsored by our employers, and just one in three benefits from government programs such as Medicare and Medicaid.  

Nearly 6% of the US population choose their insurance plans through the federal, state, or private health insurance exchanges.  These exchanges are online and provide an important way to compare the thousands of plans on offer from hundreds of insurers and calculate your premium tax relief and other reliefs to which you may be entitled.

You can, of course, approach your chosen insurance provider directly.  An insurer may even be present you with a broader choice of plans.  A company may decide not to put all its products on the marketplace.  But, unless you buy a plan through a health insurance marketplace, you will not qualify for any federal or state subsidies.

Of those uninsured, the first reason is that they believe health insurance is “too expensive.”  Many are unaware that the subsidies are most significant for the least well-off or that up to 80% of insured individuals qualify.

At the beginning of this article, we wrote,” the choice is yours,” and of course, it is.  BUT before you make that choice talk to a licensed health insurance broker.  An independent broker will act on your behalf and will cost you nothing.  They may guide you to the most cost-effective plans, save you $thousands and a great deal of worry!