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The ACA's individual mandate penalty, which used to be collected by the IRS on federal tax returns, was reduced to $0 after the end of 2018. In most states, people who have been uninsured since 2019 are no longer assessed a penalty.
But there are some areas of the country where penalties still apply if a person is uninsured and not eligible for an exemption. This article will explain the basics of the ACA's individual mandate, and where residents are still potentially subject to a tax penalty if they go without health insurance.
As of 2024, there are financial penalties for being uninsured in Massachusetts, New Jersey, California, Rhode Island, and the District of Columbia. Vermont requires residents to maintain health coverage and report their coverage status on state tax returns, but does not have a financial penalty for being uninsured.
More than a decade after it was enacted, most parts of the Affordable Care Act (ACA) (aka Obamacare) are supported by the majority of Americans.
This includes guaranteed-issue coverage regardless of pre-existing conditions, premium tax credits (subsidies) that make coverage more affordable, coverage for essential health benefits, the elimination of annual and lifetime benefit maximums, and the expansion of Medicaid.
But the individual shared responsibility penalty, aka the individual mandate penalty, was always an unpopular provision of the law. The mandate went into effect in 2014, requiring almost all Americans to maintain health insurance coverage unless they are eligible for an exemption.
From 2014 through 2018, the IRS assessed a penalty on tax filers who didn't maintain coverage and who weren't eligible for an exemption. The individual mandate itself still exists (and qualifying for an exemption from the mandate still allows a person to buy a catastrophic health plan even if they're 30 or older). But there is no longer a federal penalty for non-compliance.
Former President Trump campaigned on a promise to repeal the ACA and replace it with something else. Republicans in the House passed the American Health Care Act (AHCA) in 2017 but the legislation failed in the Senate, despite repeated attempts by GOP Senators to pass it.
Ultimately, Congress passed the Tax Cuts and Jobs Act and President Trump signed it into law in December 2017. Although the tax bill left the rest of the ACA intact, it repealed the individual mandate penalty, as of 2019 (other provisions of the tax bill took effect in 2018, but the individual mandate repeal was delayed by a year).
Although Congress did not repeal anything other than the mandate penalty—and later, some of the ACA's taxes—a lawsuit was soon filed by a group of GOP-led states, arguing that without the penalty, the mandate itself was unconstitutional.
They also argued that the mandate was not severable from the rest of the ACA, and so the entire ACA should be declared unconstitutional.
The case ultimately ended up at the Supreme Court, where the justices ruled in favor of the ACA in 2021. So although there is still no federal penalty for being uninsured, the rest of the ACA was upheld by the Supreme Court (that was the third time that the Supreme Court upheld the ACA; earlier rulings, in 2012 and 2015, also kept the ACA in place).
With the elimination of the federal individual mandate penalty, some states have implemented their own mandates and penalties:
Most of the states with individual mandates have modeled their penalties on the federal penalty that was used in 2018, which is $695 per uninsured adult (half that amount per child), up to $2,085 per family, or 2.5% of household income above the tax filing threshold, although there are some state-to-state variations.
In most cases, the revenue from the individual mandate penalty is used to make health coverage more affordable in the state. So most states with individual mandate penalties are among the states where state-funded health insurance subsidies are available, in addition to the federal subsidies created by the ACA.
In the states that have individual mandates and associated penalties, a variety of exemptions are available. The exemption criteria are generally similar to the exemption criteria used for the federal government's individual mandate, but there are some variations from one state to another.
Vermont has an individual mandate that took effect in 2020, but the state does not impose any sort of penalty for non-compliance.
Maryland created a program under which the state tax return asks about health insurance coverage, but instead of penalizing uninsured residents, the state is using the data in an effort to get these individuals enrolled in health coverage. Several other states have since followed Maryland's lead in creating an "easy enrollment" program.
The elimination of the individual mandate penalty in 2019 contributed to higher individual market (non-group) premiums for 2019.
This was because insurers expected that the people likely to drop their coverage after the penalty was eliminated would be healthy, whereas sick people would tend to keep their coverage regardless of whether there's a penalty for being uninsured.
The penalty's original purpose was to encourage healthy people to join the risk pool, as a balanced risk pool—with enough healthy people to offset the claims costs of the sick people—is necessary for any health insurance product to function.
According to rate filings for 2019 plans, average premiums would have decreased for 2019 if the individual mandate penalty had remained in place. Instead, there was a small average increase in rates. Note that although average benchmark premiums decreased slightly in 2019, overall average premiums did increase that year.
The primary reason average premiums increased instead of decreasing for 2019 was the elimination of the individual mandate penalty, along with the Trump administration's efforts to expand access to short-term health plans and association health plans.
Those non-ACA-compliant plans appeal to healthier individuals, so their expansion has the same effect as the penalty repeal, in terms of reducing the number of healthy people who maintain ACA-compliant individual market coverage.
However, because the ACA's premium subsidies adjust to keep coverage affordable even when premiums increase, the majority of people who buy health plans in the exchange/Marketplace have continued to do so. In fact, enrollment has grown to new record highs in recent years.
Although there was a drop in enrollment after the individual mandate penalty was eliminated, it was very modest: 11.75 million enrollees in 2018, dropping to 11.44 million in 2019, and then dropping only slightly in 2020, to 11.41 million.
Enrollment began to rebound in 2021, and has continued to grow ever since. More than 21 million people signed up for Marketplace plans during the open enrollment period for 2024 coverage, setting a new record high.
Even in the early days after the federal penalty was eliminated, enrollment in full-price plans—including everyone who purchases coverage outside the exchanges and everyone who didn't qualify for subsidies in the exchange—dropped much more significantly than enrollment in subsidized plans.
But the American Rescue Plan temporarily eliminated the income cap for subsidy eligibility, making subsidies more widely available and coverage more affordable for more people. And the Inflation Reduction Act extended those provisions through 2025. This was a significant factor behind the record-high enrollment in 2022, 2023, and 2024.
The ACA's individual mandate penalty was never popular, but unsubsidized premiums for individual/family health insurance would have been lower in 2019 if the penalty had not been eliminated. And that continues to be baked into the rates that insurers have used in subsequent years.
Before 2014, there was no mandate, but insurance companies in most states could decline applications or charge additional premiums based on applicants' medical history.
Once coverage became guaranteed-issue (meaning insurers could no longer consider applicants' medical history), it became necessary to impose some sort of measure to ensure that people maintain coverage year-round.
Otherwise, people would be more likely to go without coverage when they're healthy, and only sign up for coverage when they need health care, which would result in higher premiums.
But as we've seen in the years since the individual mandate penalty was eliminated, enrollment in plans through the exchanges remained quite steady and then grew to record highs. Although the individual mandate penalty was eliminated, the ACA's premium subsidies helped to prevent enrollment declines. They also spurred record-high enrollment once they were enhanced by the American Rescue Plan.
Another factor that has prevented enrollment declines is the limited enrollment opportunities for individual/family health coverage. In other words, you cannot just purchase coverage whenever you like; it has to be during open enrollment or a special enrollment period (this applies outside the exchanges as well).
Limited enrollment windows had applied to employer-sponsored health coverage for decades. But they weren't used for individual/family health coverage before 2014. The limited enrollment opportunities have helped to prevent situations in which people might otherwise wait to enroll in coverage until they need medical care.
There is no longer a federal penalty for not having health insurance. But in DC, Massachusetts, New Jersey, Rhode Island, and California, the state imposes its own penalty (collected via state tax returns) if a person doesn't maintain health insurance and isn't eligible for an exemption.
But nationwide, it's still wise to have health insurance. Not having coverage means health care for a serious ailment could be unaffordable or completely inaccessible. And it is generally not possible to sign up for coverage outside of open enrollment if you don't have a qualifying event (and many of the qualifying events now require the person to have already had minimum essential coverage in place before the qualifying event). So maintaining continuous health insurance coverage is always in your best interest.
In some places, yes, there is a penalty for not having health insurance. Massachusetts, New Jersey, Rhode Island, California, and Washington D.C each have their own insurance mandates and penalties. There is no federal penalty for being uninsured.
How much is the penalty for not having health insurance?The penalty for not having health insurance will depend on your income status and your state. Expectations and guidelines for these fees can change from year to year, so stay current on this information.
17 SourcesVerywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
By Louise Norris
Norris is a licensed health insurance agent, book author, and freelance writer. She graduated magna cum laude from Colorado State University.
