Do I Need Health Insurance Coverage?

While there’s no longer a federal tax penalty for forgoing health insurance, some states have their own laws requiring residents to carry health insurance coverage. If you live in one of those states, you may pay a fee when you file your state taxes if you didn’t have coverage for that year.^[1]

But even if you think you’re healthy enough to get by without health insurance, everyone should have it to protect them from the high costs of medical care. Without insurance, a medical emergency could potentially destroy your finances, leaving you deep in debt.

Does the law require you to have health insurance?

While the Affordable Care Act — which established the requirement to carry health insurance and created the Health Insurance Marketplace to provide affordable options — remains in effect, you no longer face a penalty if you don’t have health insurance.

The ACA established the penalty — known as the individual mandate — for not meeting minimum essential health coverage requirements. Though some people were exempt from paying the fee based on their income, most would pay either a percentage of their income or a flat dollar amount, whichever was greater. The payment would be due when you filed your federal income tax return for the year in which you had the coverage lapse.

The Tax Cuts and Jobs Act of 2017 repealed the tax penalty of the individual mandate. However, the legal requirement to maintain health insurance coverage was not removed, nor were the protections the Affordable Care Act afforded people. The Health Insurance Marketplace created by the ACA remains an option for people to access healthcare coverage.^[2]

Learn More: When Is Health Insurance Open Enrollment?

Which states require health insurance?

When Congress repealed the individual mandate, a handful of states enacted their own laws requiring health insurance coverage. In the following states, these are the penalties you’ll face for not having health insurance:

• California: At least $850 per adult and $425 per child

• Washington, D.C.: The greater of $700 per adult and $350 per child (up to $2,100 per family) or 2.5% of household income over the filing threshold

• Massachusetts: At least $276 per year, depending on income, for people earning greater than 150% of the federal poverty level

• New Jersey: A minimum of $695 for some individual taxpayers, up to a maximum of $19,793 for a family of five earning greater than $400,000 per year

• Rhode Island: The greater of 2.5% of income above the filing threshold or a dollar amount that varies by income

• Vermont: Individual mandate, but no penalty

Do you need health insurance if the law doesn’t require it?

Even if you’re completely healthy, it’s a good idea to purchase health insurance in case you find yourself needing medical care to treat an illness or injury. The average person visits a doctor four times per year. Paying for medical services out of pocket can have disastrous financial consequences.

The average cost of an emergency room visit in 2019 was $1,055. People with insurance paid an average of $274 out of pocket for a visit to the ER. But depending on the type of care you need, the cost can be much higher. For example, some lifesaving surgeries can cost more than $100,000 in medical bills. That’s enough to send a family into bankruptcy.

Health insurance isn’t just for emergencies, either. The Affordable Care Act requires health insurance companies to cover certain preventative care services, such as checkups, screenings, and immunizations. As long as you use an in-network provider, these services are available at no cost to you.

How can you get health insurance?

If you don’t have health insurance, you likely have multiple options for getting it.

Employer-sponsored coverage

If your employer offers group health insurance, you can get coverage through your job. It’s common for employers to pay a portion of your health insurance premiums as well. The Affordable Care Act requires large businesses with 50 or more full-time employees to provide health insurance to all full-time employees or pay a shared responsibility payment.

Check Out: What Is a PPO and How Does It Work?

The SHOP program

If you’re a small-business owner with at least one full-time employee (not including yourself), you can choose to get affordable health insurance for yourself and your employees through the Small Business Health Options Program. You may even qualify for the Small Business Health Care Tax Credit if you have fewer than 25 employees earning an average of $56,000 or less.^[3]

The ACA Marketplace

If your job doesn’t offer coverage and you’re self-employed, or unemployed, you can purchase an individual or family health insurance plan on Healthcare.gov or your state’s marketplace. You can use the marketplace to search for plans and apply for coverage. Make sure to compare ratings, including NCQA ratings, financial strength ratings, and Healthcare.gov star ratings, along with cost and benefits to help you choose the right plan.

You may also qualify for the Premium Tax Credit, which is designed to reduce your monthly cost if your income falls between 100% and 400% of the federal poverty level.^[4] If you qualify for cost-sharing reductions as well, you may get a lower out-of-pocket maximum. Though open enrollment runs from Nov. 1 through Jan. 15, you can also qualify for a special enrollment period in certain circumstances, such as if you lost your job.

Important Information: The Affordable Care Act has several important provisions besides the creation of the Health Insurance Marketplace. The ACA:

• Allows young adults to remain on their parents’ health insurance plans until age 26

• Prohibits insurance companies from denying someone coverage due to pre-existing conditions

• Bars insurers from setting annual or lifetime spending limits for policyholders

• Requires insurers to cover the cost of preventive services

• Mandates that insurers cover maternity care

• Expands Medicaid to cover more low-income Americans^[5]

Medicaid

You can also use your health insurance marketplace to find out if you’re eligible for Medicaid, a joint state and federal program that provides no-cost and low-cost coverage to low-income Americans. Even if you don’t qualify, your children might be eligible for financial assistance through the Children’s Health Insurance Program (CHIP). Requirements vary by state.

Private health insurance

You can purchase an off-exchange plan from a private insurance provider. But bear in mind that these plans aren’t subject to ACA regulations, so they may not cover all ACA-mandated types of care, such as mental health coverage. If they don’t, they may not qualify as minimum essential coverage. You also can’t qualify for financial help if you go this route.

Medicare

Medicare is a federal program that provides health insurance to people ages 65 and older in addition to younger people with certain disabilities and end-stage renal disease. Most people don’t pay a premium for Part A, which is hospital insurance, but everyone pays a premium for Part B, which is medical insurance. You also have the option of enrolling in Part D, which is prescription drug coverage.

Original Medicare and Medicare Advantage plans (Part C) can still leave you vulnerable to high out-of-pocket healthcare costs, so some people choose to purchase a Medicare Supplement plan for additional help with the copayments, co-insurance, and deductibles.

Learn More: Medigap vs. Medicare Advantage: Which Plan Is Best for You?

Health insurance FAQs