The Federal individual healthcare mandate may have been scuttled, but the individual mandate is alive and well in California.
Effective January 1st, the state joins Mass, New Jersey, DC and Vermont in establishing state-level penalties for those who do not have medical insurance.
What do you and your employees need to know about the new law, and what next steps should you consider?
Financial Penalty Begins in 2020
In an effort to reduce the number of uninsured people, the state of California has implemented a financial penalty for those not covered under a medical insurance plan. California residents who do not enroll in either a company-sponsored health plan, or obtain individual medical insurance, may be subject to a penalty — to be assessed by the Franchise Tax Board upon filing 2020 taxes— unless they meet the requirements for an exemption.
In many cases, taxpayers who fail to comply with the new, state-level individual mandate will face a penalty of $695. In addition, individuals may owe an additional penalty of half that amount for dependent children. Income level and the number of people in a household determine the total penalty.
Next Steps to Consider
If your employees need to secure health care coverage before the new year, you can inform them of options for enrolling in a suitable plan. Open enrollment runs through January 31, 2020, although for coverage to start on Jan. 1, individuals must sign up by Dec. 15.
Consumers can get free, confidential enrollment assistance online, or they can call 800-300-1506 to speak with a representative of Covered California.
Fortunately for those who need a plan, premiums are expected to rise by just 0.8 percent next year, the lowest increase since the launch of California’s individual health insurance market in 2014. The average rate increase for 2020 represents a significant improvement over 2019, when rates increased by nearly 9 percent. Over the past five years, the average rate increase has stood at 8.4 percent.
State officials credit two statewide initiatives with keeping the rates low for next year: state-funded tax credits for middle-class consumers who enroll in a qualifying health care plan, along with the new health care tax penalty on consumers who do not have insurance.
The new state-level penalty is part of an effort to help protect the federal Affordable Care Act. California officials estimate that the new health care tax penalty — along with the state tax credits the penalty will help fund — will result in an additional 229,000 state residents securing health insurance.
The tax credits that become available Jan. 1 will mean that many individuals who have not qualified previously now will gain eligibility for financial assistance to lower the cost of health coverage. However, keep in mind – if you offer an eligible company-sponsored plan, and the employee elects to waive coverage through the company, they will not be eligible for tax credits.