What Is the Section 5000A Shared Responsibility Payment?

Section 5000A of the Internal Revenue Code established the individual shared responsibility provision as part of the Patient Protection and Affordable Care Act (ACA). This provision required individuals to maintain a certain level of health insurance for themselves and their dependents. The goal was to encourage broad participation in the health insurance system, which helps balance the insurance risk pool. The law stipulated that for each month, an individual must have qualifying health coverage, obtain an exemption, or make a payment when filing their federal income tax return.

The Federal Shared Responsibility Payment

To comply with the federal mandate, individuals needed to have what the law defined as Minimum Essential Coverage (MEC). MEC included most types of health insurance, such as employer-sponsored plans, coverage purchased through a health insurance marketplace, and government plans like Medicare Part A, Medicaid, and TRICARE. Plans that did not qualify as MEC included those offering only limited benefits, such as stand-alone dental or vision plans or workers’ compensation. As long as an individual had MEC for at least one day in a month, they were considered covered for that entire month.

For those who did not maintain MEC and did not qualify for an exemption, a penalty known as the Individual Shared Responsibility Payment was assessed on their federal tax return. The amount was calculated using two methods, and the taxpayer was required to pay whichever amount was greater. For the 2018 tax year, the final year the federal penalty was in effect, the calculation was either 2.5% of the household income above the tax filing threshold or a flat fee of $695 per adult and $347.50 per child under 18, with a family maximum of $2,085.

For example, a family of four in 2018 with a household income of $80,000 and a tax filing threshold of $24,000 faced two calculations. The income-based penalty was 2.5% of ($80,000 – $24,000), which equals $1,400. The flat-dollar penalty was ($695 x 2) + ($347.50 x 2), totaling $2,085. In this case, the family would owe the greater amount, $2,085, for a full year without coverage. The total payment was capped at the national average premium for a bronze-level health plan.

Exemptions from the Federal Mandate

The law included several exemptions that allowed taxpayers to avoid the Shared Responsibility Payment even if they lacked coverage. These exemptions were claimed on Form 8965, Health Coverage Exemptions, which was filed with the annual tax return.

One of the most common exemptions was for having a short gap in coverage. A person could be uninsured for less than three consecutive months during the year without owing a penalty for that period. Another exemption was based on affordability; if the lowest-cost health plan available would have cost more than a certain percentage of household income (8.05% for 2018), the individual was exempt.

Taxpayers with income below the federal tax filing threshold were also exempt from the payment. Other exemptions were available for specific circumstances, such as being a member of a federally recognized Native American tribe, belonging to a recognized health care sharing ministry, or experiencing a hardship like bankruptcy or homelessness.

Current Status and State-Level Mandates

The federal landscape for health coverage requirements changed with the passage of the Tax Cuts and Jobs Act of 2017. This legislation reduced the Individual Shared Responsibility Payment under Section 5000A to $0, effective for tax years beginning after December 31, 2018. While the legal requirement to have health insurance remains in federal law, there is no longer a financial penalty at the federal level for failing to comply.

In response to the elimination of the federal penalty, several states have enacted their own individual health insurance mandates. As of 2025, the following jurisdictions require residents to maintain qualifying health coverage or face a penalty on their state tax returns:

• California
• District of Columbia
• Massachusetts
• New Jersey
• Rhode Island
• Vermont

The rules, penalty amounts, and available exemptions vary by jurisdiction. Some states mirror the previous federal penalty structure, while others have developed their own calculation methods. Therefore, individuals must consult their state’s tax authority or health insurance marketplace to understand their specific obligations. This marks a transition from a national standard to state-determined requirements.