What is the tax penalty?

Having continuous coverage ensures you have access to care when you need it and protects you from unexpected healthcare costs, among other benefits. Having health coverage also helps you avoid the California tax penalty. 

In other words, if you do not have health coverage, you may have to pay more in taxes. 

California enacted legislation to restore the individual mandate and tax penalty starting in 2020. Those who choose to go without coverage may be subject to a penalty as part of their annual state tax filing if they have access to affordable coverage within the cost limitations set by the state. There can be penalties of up to nearly $2,100 per family, which is based on 2.5 percent of household income or a minimum of $750 per adult, whichever is greater. The California Franchise Tax Board, which administers the state mandate, will assess the penalties for the 2020 coverage year when consumers file their taxes in 2021.

Californians can file for an exemption due to financial or other hardship. Visit Covered California to learn more or, for additional information, visit the California Franchise Tax Board.

If the federal individual mandate penalty is reinstated at any point, the state tax penalty will be adjusted. 

We are not tax professionals and cannot provide tax advice. If you need help, please get advice from a professional tax preparer or adviser.

What is the subsidy?

California is the first state to provide its residents who did not previously qualify for financial help because they earned more than 400% of the Federal Poverty level with state-funded premium assistance, called the California Premium Subsidy. For those eligible, the California Premium Subsidy sets a limit on how much one pays for their medical premium based on a percentage of their annual income. The amount of premium assistance that Californians can qualify for depends on age, household income and size, and the cost of affordable health care coverage in their region. State and federal premium assistance are only available for medical plans purchased through Covered California. 

Here’s what’s changing: 

  • Californians who earn between 400 to 600% of the Federal Poverty Level (FPL) (see the chart below) and who were not eligible before for federal premium assistance, or the Advanced Premium Tax Credit (APTC), may now qualify for the California Premium Subsidy. 
  • Californians who earn between 200 to 400% of FPL may also be eligible for both federal and state premium assistance and may get an additional California Premium Subsidy to further lower their costs for coverage. 
  • Californians who make under 138% of FPL, but are not eligible for Medi-Cal or Medicare may be eligible for the California Premium Subsidy.

Annual Income
  Annual Income2
Household size1 600% of FPL 500% of FPL 400% of FPL 300% of FPL 200% of FPL Up to 138% of FPL
Individual $74,940 $62,450 $49,960 $37,470 $24,980 $0 - $17,237
Couple/2 people $101,460 $84,550 $67,640 $50,730 $33,820 $0 - $23,336
Family of 4 $154,500 $128,750 $103,000 $77,250 $51,500 $0 - $35,535
Premium contribution level3 Up to 18% of income Up to 16% of income Up to 10% of income Up to 9% of income Up to 6% of income $1/month

Source: https://health-access.org/wp-content/uploads/2019/06/CA-Budget-Affordability-Assistance-Fact-Sheet_6.24.19.pdf
1 Based on number of people reported on your tax return
2 Based on Modified Adjusted Gross Income (MAGI)
3 How much you’re expected to contribute toward premium cost. Should not exceed this limit.

How do I qualify for the California Premium Subsidy?
As a reminder, the California Premium Subsidy sets a limit on how much one pays for their medical premium based on a percentage of their annual income  (see table above). To be eligible for the California Premium Subsidy, you must meet the following criteria:
  1. Earn 600% of the Federal Poverty Level or less, and
  2. Affordable coverage (the second-lowest cost silver plan) in your region costs more than your premium contribution level set by the government
You can use our subsidy eligibility calculator starting October 1 to find out if you might qualify for premium assistance and an estimation of your potential subsidy amount. If you find out you may be eligible, contact your broker to learn about your options or call Customer Service at (888) 256-3650.