Complete Guide to
State Individual Mandates

What is the ACA individual mandate and state individual mandates?

The ACA individual mandate (also known as the “individual shared responsibility provision”) requires most Americans to have qualifying health insurance (minimum essential coverage). The individual mandate is part of The Affordable Care Act (ACA) which became law in March 2010.  If individuals didn’t have proof of health insurance when they filed their taxes, the IRS assessed penalties. In December 2017 (effective January 1, 2019), Congress repealed the financial penalties for individuals not having health insurance, but the requirement to  have health insurance is still in place. 

Since then, some states have turned to state individual mandates in order to keep their healthcare marketplaces stable. When healthy individuals are required to have health insurance, it helps spread the costs so those who have chronic conditions don’t end up paying as much. 

Which states have individual healthcare mandates?

To date, California, the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont have passed state individual mandates. With each state passing its own individual mandate, it makes it difficult for companies to keep up with all the different regulations and reporting requirements. Essentially, even if you have one employee filing taxes in one of these states, your company must comply with that state’s individual mandate. This means companies will not only have to be ACA complaint at the federal level, but also at the individual state levels. If your company needs help with ACA reporting, please don’t hesitate to contact us.

Additional states are considering their own state healthcare mandate. These states include Hawaii, Washington, Connecticut, Minnesota, and Maryland. Check out the map for the latest on state individual mandates ‒ states that have them or are considering them.

Below is what we know so far. We will continue to update this page as more information is released.

Click a state stamp to learn more.

California Individual Mandate Guide

History of legislation

The State of California’s individual mandate, requiring residents to have qualifying coverage throughout the year, goes into effect January 1, 2020. The individual mandate bill AB-414 was signed into law on July 2, 2019. California released its draft policy but has not released details on the information reporting process.

Important dates

Employers are required to file annually by March 30. For the 2020 tax year, the due date is currently March 30, 2021.

Employer obligations

In-state and out-of-state employers who employ California residents are obligated to provide the same data outlined in Section 6055 of the Affordable Care Act. This section specifically covers the enrolled coverage of employees while Section 6056 covers the offer of coverage to employees.

While final details are not available, we expect fully-insured employers will rely on their insurer to provide data to the State and self-insured employers will be required to submit their own data to the State.

The penalty for employers who fail to comply is $50 per individual not reported to the State. This means if an employer has only one employee in California, they would need to comply with the California individual mandate reporting for that employee. 

California individual mandate penalties

Californians who do not have health insurance coverage will owe a penalty. This is equal to 2.5% of salary or $695 per adult and $347.50 per child, or up to $2085 per family, whichever is greater. The legislation will allow up to 850,000 lower-income residents to receive financial assistance in paying their premiums. California will offer subsidies to residents who earn less than 600% of the federal poverty level. 

Process for filing

No details are available at this time

District of Columbia Individual Mandate Guide

History of legislation

The District of Columbia (D.C.) individual mandate, requiring residents to have qualifying coverage throughout the year, went into effect on January 1, 2019. The Individual Tax Payer Health Insurance Responsibility Requirement was signed into law on June 26, 2018. D.C. released reporting requirements on August 9, 2019 and continues to release more information.

Important dates

Employers are required to report annually, within 30 days after the IRS tax deadline. For the 2019 tax year, the due date is extended to June 30, 2020.

Employer obligations

In-state and out-of-state employers who withhold and pay payroll tax to D.C. or who employ D.C. residents, even if the employer does not withhold D.C. payroll taxes. The reporting obligation is limited to Applicable Large Employers (ALEs), but requirements differ based on whether the employer offers self-insured or fully-insured coverage.

In short, if an ALE is sending 1095-C forms to employees and filing 1095-C and 1094-C forms with the IRS, they are required to file forms with the state. Employers who only have fully-insured coverage cannot rely on the insurer to provide 1095-B forms alone, they will still need to submit 1095-C and 1094-C forms to D.C.

D.C. individual mandate penalties

Individual penalties are equal to 2.5% of salary or $700 per taxpayer.
 
Process for filing

D.C. will leverage their mytax.dc.gov portal using the Office of Tax and Revenue’s proscribed file format. This format is not yet available, but it will be a delimited file with an extension of .txt. This differs from the IRS format, which is an XML file.

While D.C. indicates this is the same information provided to the IRS, for employers who employ non-D.C. residents, they must only include requested information in the file.

Testing scenarios are not yet provided, although test files can be e-mailed in; this would be concerning if the OTR file format includes full Social Security Numbers (SSNs). Upon submission, a confirmation email will be provided.

Frequently asked questions

Will D.C. provide feedback like the IRS, such as “accepted” “accepted with errors” or “rejected”?

MyTax.DC.gov does not generate an acknowledgment like IRS’s Affordable Care Act (ACA) Information Returns (AIR) System. Instead, applicable entities and third-party service providers will be notified if there are errors when they attempt to upload a file. If there are no errors, the bulk file upload will indicate “processing” until “accepted.”

If you replace or correct files with the IRS, should these files be shared with D.C.?

Yes. Applicable entities and third-party services providers can upload a correction file. However, only one correction file can be filed per business day. No files will be accepted after December 31 of the filing year.

 

Massachusetts Individual Mandate Guide

History of legislation

The State of Massachusetts’ individual mandate, requiring residents to have qualifying coverage throughout the year, went into effect in 2006 and predates the Affordable Care Act.

Employer obligations

Unlike the state mandates enacted after the Affordable Care Act, there are no employer reporting obligations as insurance carriers instead mail 1099-HC forms to residents and file electronically with the State.

New Jersey Individual Mandate Guide

History of legislation

The State of New Jersey’s individual mandate, requiring residents to have qualifying coverage throughout the year, went into effect on January 1, 2019. It was signed into law on May 30, 2018. The state released reporting requirements in June 2019 and continues to release more information.

Important dates

Employers are required to report annually. For the 2019 tax year, the due date is March 31, 2020.

Employer obligations

In-state and out-of-state employers who employ New Jersey residents, even if the employer does not withhold New Jersey payroll taxes. The reporting obligation is limited to Applicable Large Employers (ALEs), but requirements differ based on whether the employer offers self-insured or fully-insured coverage.

In short, if an ALE is sending 1095-C forms to employees and filing 1095-C and 1094-C forms with the IRS, they are required to file forms with the state. Employers who only have fully-insured coverage cannot rely on the insurer to provide 1095-B forms alone, they will still need to submit 1095-C and 1094-C forms to New Jersey.

New Jersey individual mandate penalties

Individual penalties are equal to 2.5% of salary or $695 per taxpayer.

Process for filing

New Jersey will leverage the same secure transport system that is used by employers or their vendor to submit W-2 forms. Called “MFT SecureTransport” or “AxWay,” vendors or ALEs must sign up with an account in order to be authorized to submit forms.

New Jersey requests the same XML file format used for submitting to the IRS. However, for employers who employ non-New Jersey residents, they must edit the file in order to remove those records. The XML file format requires full Social Security Numbers for employees and dependents, or dates of birth, along with full names and addresses. Further complicating matters is dependents can be covered on their parent’s insurance until age 26, they may be a resident of New Jersey while their parents are non-residents. The state advises employers notify employees in this situation to ensure their dependent receives a copy of the 1095-C instead.

Testing scenarios, which are the same scenarios provided by the IRS, allow vendors and employers to submit test submissions initially through October 31, 2019.

Frequently asked questions

Will the New Jersey provide feedback like the IRS, such as “accepted” “accepted with errors” or “rejected”?

New Jersey will only send an email notification confirmation of both successful transmission receipt and acknowledgment. If there are issues during processing, New Jersey will notify the vendor or employer. At this time, there are no other notifications being developed.

If you replace or correct files with the IRS, should these files be shared with New Jersey?

New Jersey indicated correction files should also be provided to New Jersey. Replacement files are accepted, but the only way a vendor or employer can track this is in the file name used on the transmission.

Rhode Island Individual Mandate Guide

History of legislation

The State of Rhode Island’s individual mandate, requiring residents to have qualifying coverage throughout the year, goes into effect on January 1, 2020. It was signed into law on July 5, 2019. Rhode Island has not issued any information about employer reporting obligations.

Important dates

No due dates have been set yet, but we anticipate employer reporting to begin in 2021 for the 2020 tax year.

Employer obligations

No guidance has been released around employer reporting obligations.

Rhode Island individual mandate penalties

Individual penalties are equal to 2.5% of salary or $695 per taxpayer and $347 per child.

Process for filing

No details are available at this time.

Vermont Individual Mandate Guide

History of legislation

The State of Vermont individual mandate, requiring residents to have qualifying coverage throughout the year, goes into effect on January 1, 2020. The law (H.696) was signed on May 28, 2018. Vermont has not issued any information about employer reporting obligations.

Important dates

No due dates have been set yet, but we anticipate employer reporting to begin in 2021 for the 2020 tax year.

Employer obligations

No guidance has been released around employer reporting obligations.

Vermont individual mandate penalties

No details are available at this time.

Process for filing

No details are available at this time.

States with or considering individual healthcare mandates

State Healthcare Mandates map

Need help with ACA compliance or individual state mandate reporting?

Tango Health helps our clients keep up with what’s new with the ACA and state individual mandates. We are an innovative software and services company focused on providing a higher standard of accuracy for our ACA clients. Contact us if you need help.