Too many people believe that having health care insurance is optional and that they can avoid costly monthly premiums by simply not having insurance.
This is quite common among younger, healthy, single adults who statistically do not need to see healthcare professionals on a regular basis. Consequently, the thinking among this group is now that the federal individual mandate has been done away with it will no longer cost them to go without insurance.
Not necessarily.
California Wants You to be Insured
While this is a somewhat controversial mandate for some, and a particularly rancorous requirement for others, the state of California acted to establish a state-wide penalty, or individual mandate, in response to the Trump administration’s actions to eliminate the federal mandate.
California is not alone in this action as there are four other states that have individual mandates for health insurance coverage:
Massachusetts
Unlike other states, Massachusetts already had an individual mandate even before the federal individual mandate payment was eliminated. Information reporting by employers for these purposes are tied to an employer’s tax filings with the state.
New Jersey
New Jersey was the second state to establish an individual mandate. Employers in New Jersey and “Out-of-State employers that withhold and remit New Jersey Gross Income Tax for New Jersey residents” are both required to comply with the reporting requirements.
Washington D.C.
In September 2018, lawmakers in Washington D.C. signed an individual mandate into law that became effective on January 1, 2019.
Vermont
The Vermont individual mandate will take effect January 1, 2020.
Now that California has followed suit it is quite likely that other states will do so, as well. Along with the state of Vermont, the California mandate law will begin on January 1, 2020 for California residents.
A Look at the California Individual Health Care Mandate
The State of California Franchise Tax Board posted the following article on their website on August 30, 2019 giving an overview of the state’s new state individual health care mandate.
“Here are three things California residents need to know:
1. Make sure you have health coverage
The mandate, which takes effect on Jan. 1, 2020, requires Californians to have qualifying health insurance coverage throughout the year.
Many people already have qualifying health insurance coverage, including employer-sponsored plans, coverage purchased through Covered California or directly from insurers, Medicare and most Medicaid plans.
Under the new mandate, those who fail to maintain qualifying health insurance coverage could face a financial penalty unless they qualify for an exemption.
Generally speaking, a taxpayer who fails to secure coverage will be subject to a penalty of $695 or more when they file their 2020 state income tax return in 2021. The penalty for a dependent child is half of what it would be for an adult.
To avoid a penalty, California residents need to have qualifying health insurance for themselves, their spouse or domestic partner, and their dependents for each month beginning on Jan. 1, 2020.
The open enrollment period to sign up for health care coverage with Covered California is scheduled for Oct. 15, 2019 through Jan. 15, 2020.
2. Exemptions available
Most exemptions from the mandate will be claimed when filing 2020 state income tax returns in early 2021. Additional exemptions from the mandate will be granted through Covered California beginning in January 2020.
3. Financial assistance available
To help Californians meet the requirement to have insurance coverage, the state will provide financial assistance to qualifying individuals and families, dependent on their household size and income, through Covered California. This new state financial assistance will be in addition to federal financial assistance some already receive through Covered California.
Options for no- and low-cost coverage are also available through the Medi-Cal program.
To find out more about health insurance options and financial assistance, visit CoveredCA.com.”
Keep in mind that this mandate is distinct from and separate from the federal mandate established in the Affordable Care Act (ACA) and which took effect on January 1, 2014. The requirement of the ACA is that most citizens and legal residents of the United States have health insurance. People who do not have health insurance must obtain it or pay a penalty.
However, upon the arrival of the current administration, the federal tax penalty for not being enrolled in health insurance was eliminated for tax year 2019 due to recent changes made by the administration. While the penalty was not repealed, the dollar amount was reset to $0, which effectively eliminates any penalty for 2019.
If, however, you received a penalty for not having health insurance in 2018 will still have to pay the penalty on your 2019 tax forms, if it was not paid already.
That 2018 federal tax penalty is $695 for adults and $347.50 for children, or 2% of your yearly income, whichever amount is higher.
Health Insurance: Get Covered, Stay Covered
Even though the federal penalty for going without health insurance has been eliminated, there will soon be a state penalty to contend with. Besides the tax implications, the other potential costs of being without health insurance can far exceed any monthly premiums or average out-of-pocket costs.
It’s still a smart move to seek out the guidance of a good agent and make a wise health insurance plan choice.
According to an article at TheBalance.com,
“Medical bills were the biggest cause of U.S. bankruptcies, according to a CNBC report. It estimated that 2 million people were adversely affected. A popular Facebook meme said that 643,000 Americans go bankrupt each year due to medical costs. President Obama, in his 2009 State of the Union address, said that a medical bankruptcy occurred every 30 seconds. That’s 1 million bankruptcies in a year.”
No one can know when they may suffer from a health crisis and to what extent that crisis may be. Even young, healthy individuals who may believe they can afford to skip out on health insurance coverage for now can suddenly find themselves in a financial dilemma due to unexpected and catastrophic healthcare bills.
Ideally, your goal is to find a California health insurance agent who is properly licensed, has a good track record, great references, is responsive and forthright, and – most importantly – holds service to their clients as a priority.
Update 4/19/24
It’s a common misconception that health insurance is optional, especially among younger, healthier individuals. However, with the elimination of the federal individual mandate, many believe they can forgo insurance without consequences. But in California, where the state has established its own mandate, being uninsured can result in financial penalties.
Similar to Massachusetts, New Jersey, Washington D.C., and Vermont, California requires its residents to maintain qualifying health insurance coverage throughout the year, starting from January 1, 2020. Those who fail to do so may face penalties unless exempted. To help individuals comply, the state offers financial assistance through Covered California, with open enrollment scheduled from October 15, 2019, to January 15, 2020. Seeking guidance from licensed insurance agents like those at JC Lewis Insurance Services is advisable to navigate the complexities of health insurance and make informed choices that protect both health and finances.
With the potential costs of medical emergencies far outweighing monthly premiums, securing health insurance coverage remains a prudent decision. Even young and healthy individuals can face unexpected health crises, leading to financial hardships. By working with reputable agents and exploring available options, Californians can ensure they’re adequately covered, safeguarding their well-being and financial stability in the face of unforeseen circumstances.
