ACA’s Individual Mandate Eliminated at Federal Level; Some States Impose Their Own Mandates

Early Morning Traffic Pennsylvania Avenue District of Columbia National Capital

It’s the start of the new year, and with it comes the continued debate over the Affordable Care Act (“ACA”). As it stands now, the ACA is still very much in place, and Applicable Large Employers (“ALEs”) need to exercise continued caution in making sure they are compliant. However, the issue of the Individual Mandate—a penalty imposed on individuals that do not have health insurance coverage in accordance with the ACA—now hangs in the balance.

As part of the Tax Cuts and Jobs Act, the Individual Mandate penalty at the national level was set to $0 beginning on January 1, 2019—effectively eliminating the mandate. On December 18, 2019, the United States Court of Appeals for the Fifth Circuit in New Orleans deemed the Individual Mandate unconstitutional. While that may be the case, some states are imposing their own Individual Mandates in 2020. As the ACA remains a key and complex issue, employers should also remain apprised of the states that are imposing these mandates.

The following states have already enacted penalties against individuals who do not have health insurance compliant with the ACA:

  • California: California’s Individual Mandate carries an annual penalty that amounts to 2.5% of annual household income or a per person charge, depending on which is higher. The penalty is $695 for an adult and $375.50 for a child. This mandate took effect in January 2020.
  • Washington D.C: The mandate here carries an annual penalty of $695 per adult or 2.5% of annual household income, whichever is greater. Washington D.C.’s mandate took effect in January 2019.
  • Massachusetts: The penalty is up to 50% of the minimum monthly premium payment individuals would pay if they had insurance through the Health Connector and only applies to adults 18 and older. This mandate has been in place since 2006.
  • New Jersey: New Jersey’s Individual Mandate carries an annual penalty that amounts to 2.5% of annual household income or a per person charge, depending on which is higher. The penalty is $695 for an adult and $347.50 for a child. This went into effect in January 2019.
  • Rhode Island: The penalty here is 2.5% of annual household income or $695 per uninsured adult, whichever is greater.
  • Vermont has enacted an Individual Mandate beginning January 2020. The state did not impose a penalty for non-compliance, however, at the time of this writing.

While the penalty for the Individual Mandate has been reduced to $0 for the ACA at the federal level, ALEs still need to be mindful of their requirements in the new year, especially for all states requiring the filing of forms to fulfill their Individual Mandates. Consider working with a reputable vendor, like SPS/GZ, to ensure that you are meeting the IRS’s requirements under the Affordable Care Act and filing the appropriate forms correctly to avoid any penalties in 2020