By Scott Van Horn
May 30, 2019 - Tango Health
This is the first year since 2015 the federal healthcare individual mandate penalty is not in place. Congress passed the Tax Cuts and Jobs Act in December 2017, eliminating the penalty effective January 1, 2019. The law that every individual must have healthcare has not changed, but there is no longer a federal penalty. So far, the absence of the penalty has not caused a large decrease in health insurance participation as predicted. The Centers for Medicare and Medicaid Services reported enrollment fell from 8.8 million to 8.5 million from 2018 to 2019.
There are several reasons participation didnft drop off as experts expected. Individuals may not be aware there is no longer a penalty, they may enjoy the security of insurance or they may live in a state with its own version of an ACA individual mandate penalty.
Some states turned to state-level individual mandates in order to keep their ACA marketplaces stable. By requiring healthy individuals to have health insurance, it can help spread the costs so those with chronic conditions donft end up paying so much. Also, adding an individual mandate penalty gives states extra funds for other projects. One of the other projects could be assisting lower-income individuals obtain health insurance.
So far, Massachusetts, New Jersey, the District of Columbia, Vermont, California, and Rhode Island have passed individual mandates. Penalties vary and may change yearly, but can be range from a couple hundred dollars to $1500. Below is a brief summary of what we know about the current state mandates.
| State | Date Individual Mandate in Effect | Employer reporting obligation | 2019 Individual Mandate Penalty |
|---|---|---|---|
| Massachusetts | 2006 | Yes-reinstated for 2018 | Ranges from $264 to $1,524 per taxpayer |
| New Jersey | 2019 | Yes-must file in 2020 for 2019 | 2.5% of salary or $695 per taxpayer |
| District of Columbia | 2019 | Yes-must file in 2020 for 2019 | 2.5% of salary or $700 per taxpayer |
| Vermont | 2020 | To be determined | To be determined |
| California | 2020 | Yes-must file in 2021 for 2020 | 2.5% of salary or $695 per adult and $347.50 per child |
| Rhode Island | 2020 | Yes- to be determined | 2.5% of salary or $695 per taxpayer and $347 per child |
Many states that filed an appeal against the ruling that the ACA is unconstitutional are considering adding a healthcare individual mandate. Hawaii, Washington, Connecticut, and Minnesota are discussing their own versions of this new law.
The California governor signed the individual mandate bill AB-414 on July 2, 2019.
Meanwhile, the State already issued proposed legislation for a comprehensive individual mandate to take effect on January 1, 2020. The legislation could allow up to 850,000 residents to receive financial assistance in paying their premiums, along with state-funded programs to advertise and help residents navigate the marketplace. Included within the legislation are employer reporting requirements to report the same information gathered by the IRS to satisfy IRS Code 6055 reporting requirements. Employers who fail to comply will be penalized $50 per individual not reported to the State.
On July 5, 2019, Rhode Island also signed their individual mandate into law and will require employers report to the state on individuals covered by their insurance, using the same information gathered by the IRS to satisfy IRS Code 6055. Due dates are to be determined still.
Many of these state individual mandates include provisions for employer reporting. For example, if an organization has any employees that file taxes in Massachusetts, New Jersey, California, Rhode Island or the District of Columbia, they are legally required to do separate reporting for each state. This reporting obligation gets more complex as more states pass their own versions of the healthcare individual mandate.
The State of Massachusetts reinstated their employer reporting requirement in 2018, likely in reaction to the federal individual mandate penalty changes. Every tax year by November 30th, employers are required to file a HIRD form with the State outlining the coverage offered to employees.