Beginning January 1, 2020, Californians will be subject to a state-imposed individual mandate to obtain and maintain minimum essential coverage under a health insurance plan, similar to the mandate that used to be in force under the Affordable Care Act (ACA).The following FAQs address some of the questions that we have been receiving regarding this mandate.
Q1: I thought that Congress got rid of the requirement that everyone buy health insurance? How did it come back?
Answer: Beginning in January of 2014, federal law required all Americans to obtain “minimum essential coverage” (health insurance provided by an employer, the government, or purchased individually from an insurer) or pay a tax penalty.This “individual mandate,” part of the ACA, was effectively repealed by the enactment of the Tax Cuts and Jobs Act of 2017, effective beginning in 2019. While the federal requirement to obtain health insurance is still on the books, the penalty for failure to do so was reset to $0—effectively making the federal individual mandate unenforceable.
In response, California passed SB 78 (Chapter 38, Statutes of 2019) in June of 2019. Among other provisions, SB 78 created a “Minimum Essential Coverage Individual Mandate” for California residents.Effective January 1, 2020, California residents must obtain and maintain minimum essential coverage or pay a tax penalty to the California Franchise Tax Board.Therefore, California has effectively enacted its own version of the ACA’s individual mandate.
Q2: What does the California mandate require me to do?
Answer: For each month beginning on or after January 1, 2020, California residents must be enrolled in and maintain minimum essential coverage for themselves, their spouses and dependents. Minimum essential coverage under the California law is defined by reference to the federal provision in the ACA, and includes employer-sponsored coverage (for active employees, retirees and their beneficiaries), coverage purchased on an Exchange, Medicare Part A, Medicare Advantage, Medicaid, CHIP and TRICARE.
Q3: Are there any exceptions?
Answer: Individuals who qualify may obtain a certificate of exemption for hardship or religious conscience from Covered California. Individuals will also generally not be required to maintain coverage for months in which they are incarcerated. Non-citizens who are not lawfully present in the United States will be exempt from the requirement, as will members of Indian tribes. Individuals will not be required to maintain coverage in months that they are bona fide residents of other states or U.S. territories.
Q4: What is the penalty if a California resident fails to maintain coverage under California’s mandate?
Answer: A tax penalty will be imposed on a responsible individual if the individual, their applicable spouse or applicable dependent fails to enroll in and maintain minimum essential coverage for one or more months. The penalty for 2020 will be at least $695/year (indexed to the California Consumer Price Index in later years). For each month a person fails to have coverage, the penalty will be 1/12 of $695.00, or approximately $59.92. For persons under the age of 18, the annual penalty will be $347.50 or approximately $28.96/month. For families, the penalty will be capped at 3 times the individual penalty. The penalty will not be assessed in any month in which the responsible individual’s penalty amount exceeds 8.3% of the individual’s applicable household income for the taxable year.
Q5: Is there any financial help available for those who can’t afford to buy insurance?
Answer: SB 78 also established an Individual Market Assistance program, which will help California residents with household incomes at or below 600% of the Federal Poverty Level ($150,600 for a family of 4 in 2019) to afford health insurance coverage on the Exchange.
Q6: Our open enrollment for benefits was in the spring.Are employees who opted out stuck with their decision?
Answer: Some carriers have opened a special enrollment period for small group employees who previously declined coverage under their employer’s group health plan, so those employees can elect coverage beginning on January 1, 2020.Please check with your Keenan Benefits Consultant for more information.
Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.