Do you have to have health insurance? The Affordable Care Act (ACA), signed into law in 2010, was designed to make health insurance coverage more affordable for Americans through the creation of tax subsidies, while also opening up Medicaid eligibility to more low-income individuals and families. The ACA effectively made having health insurance mandatory; not having it meant you would incur a tax penalty.
But what about now? What is the penalty for not having health insurance today? If you don't have it, does the rule still apply? Here's what you need to know about mandatory health insurance coverage.
- Health insurance coverage is no longer mandatory at the federal level, as of January 1, 2019.
- Some states still require you to have health insurance coverage to avoid a tax penalty.
- Going without health insurance saves you money since you're not paying premiums, but it could put you at financial risk if you get injured or develop a serious illness.
Affordable Care Act's Coverage Mandate
Under the ACA, also called "Obamacare", Americans who were not otherwise eligible for an exemption were required to have health insurance coverage for themselves and their families. Failure to have minimum health insurance triggered a tax penalty; at the same time, the ACA allowed for the creation of a premium tax credit to help Americans offset some of the cost of getting health insurance through the healthcare marketplace.
This rule changed in January 2019, when the tax penalty mandate for health insurance was eliminated. While the ACA technically still exists, Americans who choose not to maintain health insurance for themselves or their family members in 2019 and beyond won't be penalized at tax time. It's estimated that as many as four million Americans will choose not to have health insurance coverage this year as a result of the penalty being eliminated.
As a result of the American Rescue Plan of 2021, all taxpayers with insurance bought on the ACA Marketplace are now eligible for the ACA premium tax credit; previously, filers were ineligible if their income exceeded 400% of the federal poverty line.
State-Imposed Rules on Health Insurance Coverage
While the federal government no longer requires you to have health insurance, there are a handful of states that have mandates on the books regarding coverage or are trying to pass laws to make health insurance mandatory.
The states that require or have laws set to take effect that will require coverage include:
- New Jersey
Washington, D.C., also requires residents to purchase health insurance. Other states—including Connecticut, Maryland, Hawaii, and Rhode Island—have also attempted to pass legislation that would make health insurance mandatory for their residents. In states where health insurance is mandatory, the rules for getting and maintaining coverage are similar to those under the ACA, with coverage available through state-run health insurance marketplaces.
No Mandatory Health Insurance: Advantages
The primary upside to health insurance no longer being mandatory at the federal level is the money you don't have to spend on premiums that remains in your pocket.
"If you're young and healthy, it's possible to get by without paying a monthly bill for health insurance, which saves you money," says Chane Steiner, CEO of Crediful, a personal finance website. That could be helpful if you're trying to pay off student loans or save money toward a down payment on a home.
Of course, if your employer offers some type of health insurance coverage as part of your benefits package, you may be able to get affordable coverage anyway, without having to shop around for it.
Christina Nicholson, owner of Media Maven, opted to cancel her health insurance and pay out of pocket for pregnancy-related medical expenses that her plan didn't cover. She first considered adding herself to her husband's health insurance, but their premiums would have increased by over $1,000 per month so she opted to pay her own medical bills.
Fortunately, she was able to negotiate discounts from her hospitals and doctors, which ended up costing her significantly less money than she would have paid had she been covered. In one instance, the difference between the cost of medical tests with insurance was $1,900 more than her negotiated fee without insurance.
No Mandatory Health Insurance: Disadvantages
It takes a very savvy healthcare consumer to score discounts from providers, not all of whom will necessarily go along with such requests. Normally, insurance companies, not individuals, are the ones negotiating with hospitals and doctors to lower prices for large member groups.
The main drawback when health insurance isn't mandatory, however, is the risk you assume when choosing the self-pay route. The downside of going health-insurance-free could be substantial if you end up needing expensive medical care and you don't have the money to pay for it from savings or your monthly income.
"You're one major accident or illness away from falling into long-term debt, as medical bills can be quite excessive out of pocket," Steiner says.
The average cost in 2019 of an emergency room visit to treat issues that could be handled at an urgent care or primary care facility.
Even a minor health issue could result in a financial setback. According to the UnitedHealth Group, the average cost of an emergency room visit to treat issues that could be handled at an urgent care or primary care facility was just over $2,000 in 2019.
That cost is 10 times higher compared to seeing an urgent care doctor and 12 times higher than primary care, but people who don't have health insurance may assume the ER is their only option if they get sick or hurt. Plus, illness and medical bills are known contributors to bankruptcy.
Options for Health Insurance Coverage
Before going without health insurance, Nicholson reviewed all of her options, which included being added to her husband's plan and enrolling in a healthcare cost-sharing program. Those are also things you might consider if you're without health insurance or thinking about canceling your plan since coverage is no longer mandatory.
You may consider short-term health insurance or catastrophic care policies, but these have their limitations, in terms of what's covered and who's eligible. Applying for Medicaid may also be an option, but whether you qualify is dependent on your income and family size. Each state has different guidelines with regard to the income and asset thresholds allowed for eligibility for Medicaid coverage.
The Bottom Line
Not being required by federal law to have health insurance coverage doesn't mean you don't need it. If you don't have health insurance, take time to research coverage options to determine which is the best fit for your healthcare needs and budget.