Complying with the California Individual Healthcare Mandate

Effective in January 2020, the California individual health care mandate requires all state residents to obtain minimum essential health coverage or face a penalty unless they obtain an exemption. In addition to maintaining their own health coverage, individuals must ensure their spouse or domestic partner and any dependents have qualifying coverage.

Many people have qualifying health insurance through employer-sponsored plans, coverage purchased through the Covered California healthcare exchange or directly from insurers, Medicare and most Medicaid plans. State residents must include information on their health coverage when filing their 2020 tax return.

Penalty Overview
The California Individual Shared Responsibility Penalty (ISRP) for no coverage is based on the number of people in the household and income. It is either a flat penalty per household member or 2.5 percent of gross household income that exceeds California’s filing threshold, whichever is higher.

California state residents who do not obtain adequate health coverage for the entire duration of the 2020 tax year will be subject to a penalty of $750 (multiplied by a cost of living adjustment) per adult and $375 per child. For example, a married couple could pay a penalty of $1,500 and a family of four could pay a penalty of $2,250. State residents may use the Individual Shared Penalty Estimator tool provided by the California Franchise Tax Board (FTB) to estimate the penalty they may owe for the 2020 tax year.

Obtaining Coverage
Due to the economic impacts from COVID-19, individuals may now enroll in health care coverage during Covered California’s special enrollment period extending through May 14, 2021. Eligibility requirements are similar to those in place during the annual open enrollment period. Visit Covered California or call (800) 300-1506 for more information.

In addition, the state may provide financial help for qualifying individuals and families through Covered California that is based on household size, age, income and region. Individuals can receive financial help from the state even if they receive federal financial help through Covered California. Options for no-and low-cost coverage are also available through the Medi-Cal program.

Qualifying Exemptions
If a taxpayer’s annual income drops significantly enough to place them below the tax filing threshold, or available health coverage becomes unaffordable, the individual may qualify for an exemption to the coverage requirement. Per the FTB, unaffordable occurs when the lowest cost plan option, minus any available financial assistance, is more than 8.24 percent of projected income.

Individuals may claim most exemptions on their state income tax return while filing. In addition, exemptions processed by Covered California include religious conscience exemption, affordability hardship and general hardships.

California is working to reduce the number of uninsured individuals and families through enforcement of the individual mandate for minimum essential coverage. Additional information for state residents, tax professionals, insurance providers and employers can be accessed on the FTB website.


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