Do You Get Penalized for Not Having Health Insurance?
Understand current health insurance laws. While the federal penalty is now $0, some states have their own mandates. Learn how these rules are applied.
Whether a penalty exists for not having health insurance depends on where you live, as rules are a mix of federal and state laws that have changed over time. Understanding your specific obligations requires looking at both levels of government to determine if you will face a financial consequence for being uninsured.
The Federal Individual Mandate
The Affordable Care Act (ACA) of 2010 introduced the individual mandate, which required most Americans to maintain minimum essential coverage. The goal was to ensure healthy individuals participated in the insurance market to balance the costs of covering those with higher medical needs. Those who did not purchase qualifying health coverage were required to pay a penalty.
This penalty was calculated and paid when filing federal income tax returns with the Internal Revenue Service (IRS). For the 2018 tax year, the penalty was the greater of two amounts: 2.5% of the household’s income or a flat fee of $695 per adult and $347.50 per child, with a family maximum. This created a financial incentive for individuals to obtain health insurance to avoid the penalty.
The Tax Cuts and Jobs Act of 2017 reduced the associated federal penalty to zero dollars, effective January 1, 2019. Consequently, while the federal law requiring health coverage technically still exists, there is no longer a financial penalty from the federal government for failing to have it.
State-Level Health Insurance Mandates
In response to the federal penalty being reduced to zero, several states have implemented their own individual health insurance mandates. These states require their residents to have qualifying health coverage or pay a penalty on their state tax returns to maintain stability in their insurance markets.
As of 2025, the jurisdictions that have their own individual mandates with financial penalties are California, Massachusetts, New Jersey, and Rhode Island, along with the District of Columbia. The specifics of the coverage requirements and penalties are determined by each state’s laws.
It is important for residents of these specific areas to be aware of their local obligations. Another state, Vermont, also has a mandate requiring coverage but does not currently impose a financial penalty for non-compliance.
Calculating State Penalties
The methods for calculating state-level penalties vary by jurisdiction but generally follow one of two models. The penalty is calculated as a percentage of the household’s income or as a flat-dollar amount per uninsured person in the household. The final penalty is typically the greater of these two calculated amounts.
For example, a state might set its penalty as 2.5% of household income or a flat rate of over $900 per adult and half that amount per dependent child. A family of four with a household income of $100,000 would calculate the penalty both ways. The percentage-based penalty would be $2,500, while the flat-rate penalty for two adults and two children might be around $2,700. In this scenario, the family would owe the higher amount, $2,700.
This penalty is assessed for each month an individual or family member goes without qualifying health coverage. The total amount is then paid when filing the annual state income tax return. States provide worksheets with their tax forms to help residents determine the exact penalty amount they owe.
Exemptions from State Penalties
Even in states with an individual mandate, there are specific circumstances where a person can be granted an exemption from the penalty. The specific qualifications for exemptions are defined by each state but often share common themes.
One common exemption is based on income; if a resident’s household income is below the state’s income tax filing threshold, they are typically exempt. Another exemption relates to affordability, where if the lowest-cost health plan available costs more than a certain percentage of household income, the penalty does not apply.
Other exemptions address specific life situations. A short gap in coverage, usually lasting less than three consecutive months, will often not trigger a penalty. States also provide exemptions for hardships, which can include situations like homelessness, eviction, bankruptcy, or experiencing a natural disaster.
To claim an exemption, individuals usually file a specific form with their state tax return. Some situations may require applying for an exemption certificate from the state’s health insurance marketplace.