California has a new healthcare law beginning this year in 2020 under which state residents: 

  • Are required to have qualifying health insurance (employer-sponsored plans, coverage through Covered California or from insurers, Medicaid and most Medicaid plans)
  • Without insurance will be fined via their tax return
  • Can avail of an exemption from buying/ coverage

Penalties for being uninsured throughout the year can start at $695 for an adult who is uninsured for the whole year and half of that for a dependent child. A family of 4 could end up paying about $2,000 extra on their tax returns in 2021 for not being covered by health insurance in 2020. 

However, there is room for exemptions that can be claimed on the state tax return if:

  • Your income is below the state’s tax filing threshold
  • You have had a coverage gap of 3 consecutive coverage months or less
  • If you can make a case that you cannot afford health coverage with the income reported on your state filing
  • You are a non-citizen who is not lawfully present
  • You are a citizen residing abroad or in another state
  • You are members of a healthcare sharing ministry
  • You are American Indian or Alaska Natives
  • You have been incarcerated/
  • You are enrolled in limited or restricted-scope Medi-Cal or a similar plan

Speaking with Kaiser Health News, Laurel Lucia, director of the Health Care Program at the University of California-Berkeley’s Center for Labor Research and Education, emphasized the need to provide clear guidance to state residents on their exemption eligibility to avoid unnecessary penalties.

The state does offer financial assistance to those individuals and families who need help affording health care coverage based on:

  • Household size
  • Age
  • Income
  • Religion

California’s health insurance law is modeled on what was a crucial mandate of the Affordable Care Act (ACA) that required every individual to have health insurance or risk being penalized—this mandate was invalidated following a ruling by a federal appeals court in December 2019. Inquiries are pending with a federal district judge in Texas who will decide how lifting the mandate will impact the rest of the ACA’s provisions such as protection for those with pre-existing conditions and coverage for dependent children up to 26 years of age.

Massachusetts, New Jersey, Rhode Island, Vermont and Washington, D.C., are the other states that have adopted the individual mandate. States plan to redirect some, or all, of the funds received from these penalties into reinsurance programs that partially reimburse insurers for certain high-cost claims and ultimately lower premiums. According to a report by the state’s Legislative Analyst’s Office, about $317 million in fines will be collected in 2020-2021, which the state plans to use as revenue to offset the cost of new state subsidies offered under Covered California to make care more affordable.