What Is the Individual Mandate in the Affordable Care Act?

Obamacare, also known as the Affordable Care Act or ACA, is the health reform law that was enacted in 2010 under the Obama administration. Probably the most controversial aspect of the ACA was the individual mandate, which required that every United States citizen obtain health insurance or pay a penalty. While the mandate’s goal was to encourage individuals to get health insurance, many argued that it interfered with personal choices.

A History of the ACA Individual Mandate

The official name of the mandate is the “Individual Shared Responsibility Provision.” It required all Americans to obtain health insurance coverage or face paying the “shared responsibility payment,” which is the name for the penalty for not having insurance. The penalty payment would be added to your state or federal tax return.

Those who supported the mandate argued that it increased the number of people with health insurance. They also said it would help control healthcare costs since the pool of enrollees would include younger people, which would help offset the higher costs of care for older enrollees. Those opposed argued that no one should be forced into purchasing health insurance.

The mandate required individuals and their dependents have medical insurance that included “minimum essential coverage.” Essential coverage could be obtained by one of the following methods:

  • Through a government-sponsored plan like Medicare, Medicaid, or CHIP (Children’s Health Insurance Program)
  • Through an employer-sponsored group health plan
  • Through individual plans that had essential health benefits.

Individuals who did not obtain health insurance coverage started paying the penalty in 2014. Over time, that penalty gradually increased. The amount of the penalty was not the same for everyone. Individuals paid the greater of these two options:

  1. A percentage of the household’s income. (1% in 2014, 2% in 2015, and 2.5% in 2016 and beyond)
  2. A flat amount for each household member. ($95 in 2014, $325 in 2015, and $695 in 2016 and beyond) Dependents under the age of 18 paid half of the penalty amount each year, and penalties were capped at 300% of the yearly flat dollar amount.

In addition, the penalty could not exceed the national average for Bronze plans that were offered through the Marketplace. (Obamacare plans are named after metal tiers: Platinum, Gold, Silver, and Bronze.)

In 2017, the individual mandate was eliminated, and the change went into effect in 2019.

States with Health Insurance Mandates

The national mandate may have been terminated, but some states still apply their own medical insurance mandates, which may or may not include financial penalties. States with penalties include California, New Jersey, Massachusetts, Rhode Island, and the District of Columbia. Maryland and Vermont do not charge penalties but do require their residents to report their insurance status.

Penalties for the individual states are listed below.

California: In 2021, residents with no health coverage and no exemption pay the greater of:

  • 2.5% of their gross income that exceeds the state’s threshold based on household size
  • A flat fee of $800 for adults and $400 for children

Massachusetts: The mandate only applies to individuals aged 18 and older and is waived for those who qualify for a hardship or exemption, as well as those whose income is less than 150% of the FPL (Federal Poverty Level). The 2022 penalty is based on a sliding scale.

  • Between 150.1% and 200% FPL = $276
  • Between 200.1% and 250% FPL = $540
  • Between 250.1% and 300% FPL = $804
  • More than 300% FPL = $1,908

New Jersey: Residents pay a penalty based on how many months they went without coverage or a coverage exemption. Penalties range from $695 to $3,492 for individual taxpayers and increases for bigger households.

Rhode Island: Residents with no health insurance pay the greater amount between:

  • 2.5% of their household income (Only the income that is above the filing requirement is included, and it is not to exceed the annual premium for a Bronze plan.)
  • $695 for adults and $347.50 for children under the age of 18

District of Columbia: Residents with no healthcare coverage pay the greater amount of:

  • 2.5% of the household income (above the filing threshold)
  • $695 for adults and $347.50 for children under the age of 18 (capped at $2,085 per household)

Why Do Some States Still Mandate Health Insurance?

Select states are still choosing to mandate health insurance for the same reasons it was originally mandated by the Affordable Care Act – they are attempting to reduce healthcare costs across the state. Proponents of the mandate argue that healthy individuals help offset the care of sicker ones, and still, it gives them coverage when they need it. In addition, states enforce the mandate to make sure insurance policies meet standards of coverage.

Additionally, the ACA mandate is still in effect as far as employers are concerned. Companies over a certain size are required to offer health insurance plans to their employees. Employers with at least 50 employees must offer policies with essential benefits to 95% of their staff or pay penalties.

While the individual mandate is no longer in effect in Texas, we still strongly encourage our clients to enroll in health insurance. Medical debt is the number one cause of bankruptcy in America, and with the rising costs of healthcare, it’s easy to see why. The agents at Cover Mile can help you search for health insurance in Texas.