The state of California has enacted a law that will penalize individuals if they do not have health insurance, which could leave people with lower income tax refunds.
Adults who do not have insurance or do not qualify for one of the exemptions available under the law will have to pay $695. Dependent children will have to pay half as much. For people who do not have health insurance in 2020, the penalty will be due when they file their income tax returns in 2021. In some cases, individuals may instead have to pay 2.5% of their total income as the penalty.
California has followed the penalty that was originally included in the Affordable Care Act. Congress eliminated the penalty provision of the ACA earlier this year. Vermont, Rhode Island, Massachusetts, New Jersey, and Washington, D.C,, have similar mandates in place.
The penalty is expected to cost Californians $317 million in the first year, according to an estimate from the state’s Legislative Analyst’s Office. The money is going to be used to make health insurance more affordable for individuals with lower incomes.
Individuals with most types of health insurance, including Medicare and Medi-Cal will not have to pay the penalty.
Individuals will have until Jan. 31 to purchase a plan for 2020.
Among the other exemptions is one for individuals who have have had to spend at least 8.24% of their income to purchase health insurance, although some advocates say that threshold was set too high. From the report:
Gerald Kominski, a senior fellow at the UCLA Center for Health Policy Research, says the 8.24% threshold to qualify for the affordability exemption is too high and pushes many middle-class families to pay a penalty even when they are hard-pressed to buy insurance.
