What Is the Affordable Care Act (ACA) Individual Mandate?
Key takeaways:
The Affordable Care Act (ACA) had an individual mandate that required consumers nationwide to have health insurance coverage or pay a penalty.
Advocates argued that the mandate helped to control health insurance costs. Opponents said consumers should be able to decide whether they wanted to buy health insurance without consequence.
Congress voted to remove the ACA individual mandate in 2017. Since then, some states have enacted their own mandates, but not all of them carry a financial penalty.
Table of contents
The Patient Protection and Affordable Care Act — also known as the Affordable Care Act, ACA. or Obamacare — is the sweeping health-reform law enacted in 2010.
One of the most controversial aspects of the Affordable Care Act was the individual mandate.
The mandate aimed to encourage people in the U.S. to maintain health insurance coverage. This meant that most people who were not signed up for health insurance faced a financial penalty. The mandate drew widespread criticism from those who believed having a health insurance plan should be a personal choice.
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Why was the individual mandate included in the ACA?
The individual mandate was a provision within the ACA that required individuals to purchase what's known as "minimum essential coverage" or face a tax penalty, unless they were eligible for an exemption.
Mandate supporters argued that a penalty would increase the number of people who had health insurance. They also said the mandate would help to control costs, because a larger pool of younger and healthier customers would offset the healthcare system’s expenses for those who were older and sicker. Mandate opponents argued that no one should be forced to buy health insurance.
What were the requirements for the ACA individual mandate?
The individual mandate required adults and their dependents to have health insurance. Specifically, they were required to have "minimum essential coverage." The types of coverage that met this requirement were:
Coverage under a government-sponsored health plan, such as Medicare Part A, Medicaid, or the Children's Health Insurance Program (CHIP)
Coverage through an employer-sponsored plan
Coverage through plans available in an ACA marketplace, which offer essential health benefits
How much was the financial penalty for not having individual health insurance?
When the ACA was first enacted in 2010, the Obama administration wanted to give people the opportunity to adjust to the mandate. As a result, the penalty began in 2014, and the amount increased over time. The penalty was calculated as the greater of the following:
A percentage of the household's applicable income: The percentage was 1% in 2014, 2% in 2015, and 2.5% after that.
A flat dollar amount for each taxpayer and each dependent in a household: The amount was $95 in 2014, $325 in 2015, and $695 after that. The amount was half for dependents under 18. A household’s penalty was capped at 300% of the annual flat dollar amount.
The penalty also could not be higher than the national average premium for bronze plans offered through the ACA marketplace at the time.
Is the ACA individual mandate still in effect nationwide?
No, the ACA individual mandate is no longer in effect. From the moment the Affordable Care Act went into effect, the public had a divided opinion about the individual mandate and penalty. And a 2017 report by the Urban Institute’s Health Policy Center found that 39.3% of adults ages 18 to 64 surveyed wanted to repeal the individual mandate. By comparison, 29.6% wanted to keep it and 30.5% were undecided.
The mandate was particularly unpopular among Republicans. In 2017, a Republican-led Congress eliminated the penalty (effective in 2019) for people without health insurance by passing the Tax Cuts and Jobs Act.
Is the ACA individual mandate still in effect in some states?
While the ACA individual mandate is no longer in effect, certain states apply their own health insurance mandates, some of which have financial penalties. Residents of California, Massachusetts, New Jersey, Rhode Island, and Washington, D.C. are required to buy health insurance or face a penalty, unless they have an exemption.
Maryland and Vermont require residents to report their health insurance status but do not have a financial penalty for being uninsured.
How much is the penalty in states with a healthcare mandate?
Each state or district with a healthcare mandate has its own process for calculating the penalty for not having coverage, if there is one.
In California, where residents have a penalty for not having coverage, the amount varies annually. For the 2023 tax year, the penalty was at least $900 per adult and $450 per dependent under 18 in a household. (This is the most current information available at the time of publication.) Residents can use the state’s Individual Shared Responsibility Penalty Estimator to determine the potential amount owed for the current tax year.
In Massachusetts, the healthcare mandate doesn’t apply to anyone under the age of 18. It also doesn’t apply to people with a qualified hardship or an exemption and those whose incomes are equal to or less than 150% of the federal poverty level (FPL). The penalty is assessed on a sliding scale. For the 2024 tax year, individuals without insurance must pay:
$288 per year if they earn 150.1% to 200% of the FPL
$576 per year if they earn 200.1% to 250% of the FPL
$852 per year if they earn 250.1% to 300% of the FPL
$1,308 per year if they earn 300.1% to 400% of the FPL
$1,524 per year if they earn 400.1% to 500% of the FPL
$2,100 per year if they earn above 500% of the FPL
In New Jersey, the penalty is assessed based on how many months people in the household did not have minimum essential coverage or a coverage exemption. For the 2025 tax year, the amount ranges between $695 and $4,284 for an individual taxpayer and increases based on the number of additional uninsured people in the household as well as household income.
In Rhode Island, the penalty is whichever of these amounts is greater:
2.5% of annual household income
$695 per adult and $347.50 per dependent under 18
In Washington, D.C., the penalty for the 2024 tax year is the greater of:
2.5% of annual household income over the federal tax filing threshold
$795 per adult and $397.50 per dependent under 18, with a cap of $2,385 per family
States that require health coverage information
In Vermont, there is no financial penalty, as mentioned. However, residents must report whether they have health insurance when they file their state taxes. Similarly, Maryland asks residents about health insurance status when they file taxes as an avenue to enrollment.
Why do some states still mandate healthcare coverage?
According to a report by USC-Brookings Schaeffer Initiative for Health Policy, some states still mandate health insurance coverage in an attempt to reduce costs for everybody. The argument is that healthy people buying coverage not only gives them access to care but also offsets costs for less-healthy people who access services more frequently.
States also mandate coverage to ensure health insurance policies meet certain standards and to increase revenue.
Reporting mandates as a path to health insurance coverage
While most states don't mandate coverage, some use creative ways to entice residents to buy health insurance. As mentioned, Maryland asks residents about their health insurance status on state tax forms. Then, the state notifies residents if they are eligible for Medicaid or subsidized insurance from the state’s health insurance marketplace.
What is the employer mandate and how is it different from the Obamacare individual mandate?
As mentioned, the Obamacare individual mandate required individuals in the U.S. to have health insurance. The employer mandate is a part of the Affordable Care Act that requires businesses of a certain size to offer health insurance to their employees. Employers with 50 or more full-time employees must offer minimum essential coverage to 95% of their full-time staff or pay a penalty. While the Affordable Care Act’s individual mandate has ended, the employer mandate is still in effect.
The bottom line
The Affordable Care Act (ACA) individual mandate encouraged consumers to have health insurance by imposing a financial penalty if they did not have coverage or an exemption. Congress removed the ACA individual mandate in 2017 and the change was effective in 2019. But some states have their own healthcare mandates that impose financial penalties. Other states ask about insurance status on state tax filings, but do not impose a penalty. This information is then used to usher uninsured residents who qualify into options such as subsidized ACA marketplace coverage or Medicaid.
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References
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