As the Affordable Care Act’s (ACA) requirement for individuals to have health insurance coverage, known as the individual mandate, has faced challenges over the last few years, a growing number of states have stepped in to enact their own health care coverage mandates.

When the Tax Cuts and Jobs Act (TCJA) was passed at the end of 2017, the law reduced the individual penalty for failing to have health insurance coverage to zero dollars starting in 2019. Although not technically considered a repeal of the individual mandate, it had a similar effect. 

The individual mandate has also faced court cases. A 2018 lawsuit, known as Texas v. United States, challenged the constitutionality of the individual mandate. On December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit issued its long-awaited decision, concluding that the ACA individual mandate is unconstitutional. The court did not fully resolve all the questions in the case and sent it back to the lower court. There is still the potential for Texas v. United States to be heard at the Supreme Court, although the Supreme Court declined this case during the current term that ends in June.

During these last several years of uncertainty about the ACA, several states passed their own individual mandates. This results in more reporting requirements and complexity for employers and plan sponsors, especially those with employees in multiple states. The January 2020 issue of Benefits Magazine details employer reporting requirements in the article “State-by-State Individual Mandate Reporting Compliance: A Cautionary Tale.” Generally, the state reporting requirements use the Internal Revenue Service (IRS) reporting forms 1094 and 1095 with the exception of Massachusetts, which continues using its state form MA 1099-HC.

Here is a summary from each state that has passed individual mandates and their reporting requirements:

California

• Effective date: January 1, 2020
• Requires minimum essential coverage (MEC) for individuals and their dependents
• The penalty for not having coverage is 2.5% of the taxpayer’s household income but will not apply if an individual’s premium contribution exceeds 8.3% of household income. 
• California individual mandate legislation establishes a three-year program to provide additional state subsidies to help certain households purchase coverage through Covered California, the state’s public exchange. 
• Employers are required to file IRS forms electronically to the state by March 31, 2021.

District of Columbia

• Effective date: January 1, 2019
• D.C. residents must have MEC for themselves and their dependents or will have to pay a tax penalty.
• The D.C. law follows many of the ACA definitions, including that for MEC.
• The reporting requirements affect employers with at least 50 full-time employees. 
• Employers are required to file IRS forms by June 30, 2020 (for 2019).

Massachusetts 

• The Massachusetts individual mandate was the blueprint for the ACA mandate and went into effect in 2006.
• State residents must have minimum creditable coverage (MCC), which is generally a higher level of coverage than ACA-mandated minimum essential coverage (MEC), or pay a penalty.
• The penalty amount varies by income, age and family size and can be no more than the lowest-priced plan available to an individual through Massachusetts ConnectorCare.
• The penalty only applies to adults, whereas under ACA, families also have to pay a penalty for having uninsured children.
• Employers must file reports annually to inform the state whether their health plans meet the MCC requirements.
• Employers or insurance companies are required to issue state form MA 1099-HC to employees by January 31. 

[Free Member Webcast: ACA: Where We Are Now |February 27, 2020 | 3:00 p.m. ET]

New Jersey

• Effective date: January 1, 2019
• All family members are required to have MEC unless qualifying for an exemption or pay a shared responsibility payment, determined by income and family size. 
• The amount of the shared responsibility payment is capped based on the statewide average premium for a Bronze Health Plan in New Jersey. 
• Beginning in 2020, employers have reporting requirements for all employees residing in New Jersey and are required to file IRS forms electronically to the state by March 31.

Rhode Island

• Effective date: January 1, 2020
• The individual mandate applies to individuals and their dependents.
• The individual mandate is similar to the original federal ACA mandate, including the definitions for MEC and penalty calculations. 
• The penalty is calculated either as 2.5% of yearly household income or per person, whichever amount is higher.
• Employers are required to file to the state using IRS forms by January 31, 2021.

Vermont

• Effective date: January 1, 2020
• Residents are required to self-report compliance for 2020, although there are no penalties for not reporting. 
• When Vermont residents files their individual income tax form, they indicate whether they had MEC coverage during the tax year. If requested by the state, they could be required to submit their 1095 form as proof of coverage.  
• There are no employer reporting requirements at this time. 

More to Come For Health Insurance Coverage Mandates?

There are five additional states considering individual mandates: Connecticut, Hawaii, Maryland, Minnesota and Washington. 

Even if you don’t have workers in the states listed, stay tuned to the International Foundation resources like our Future of ACA page for more information.

Anne Newhouse, CEBS
Information/Research Specialist at the International Foundation of Employee Benefit Plans

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