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Is Health Insurance Mandatory in the US?

Agnus Smith | Published: June 14, 2018

Stamping word mandatory

Updated: September 6, 2018

The Affordable Care Act (ACA), isn’t dead just yet, but it’s safe to say that it’s hanging on by a thread. The controversial piece of legislation that reformed the entire US healthcare system under President Obama, which is where the name Obamacare came from, made health insurance mandatory for every American under the individual mandate.

However, while Obamacare was well received by most Democrats and Progressives for providing health coverage for the vulnerable population, it was quickly met with lawsuits and protest by Republicans and Conservatives alike. While compulsory medical insurance may have once been the law of the land, here’s where we stand now.

Is Health Insurance Still Mandatory?

Starting in 2019, you will no longer be required to have health insurance. However, if you chose to forego health coverage this year (2018), you may still be subject to a tax penalty. Though, chances are you may be exempt, which you can learn more about in just a minute.

Calculate Your Obamacare Tax-Penalty For 2018 here

Even though health insurance is no longer mandatory, it is still smart to get covered. Health insurance prices may be expensive, but the prices of medical services have also been on the rise. Without having coverage, you may be left with a mountain of bills that could send you into debt.

Why Trump Changed The Law

President Trump had many infamous campaign slogans, most notably the ‘build the wall’ chant, which included repealing and replacing Obamacare. However, after a number of unsuccessful attempts, the 45th president of the United States had to accept that a full repeal was unlikely. So instead, he and his administration did the next best thing, target the heart of the Affordable Care Act.

The thing about Obamacare is that it was a very intricate piece of legislation with tons of moving parts, but none more important than the individual mandate. The individual mandate was what made it work because by making health insurance mandatory for all Americans, you create one giant risk pool which would, in turn, lower the cost of coverage for everyone. By removing compulsory health coverage, you essentially kill Obamacare.

Now, it’s important to take a step back, because there is a secondary reason Trump and Conservatives carried such a strong hatred towards the individual mandate. The reason being, forcing Americans to purchases a good or service (though some debate healthcare is a right) is unconstitutional, and that didn’t sit well.

So, given that Trump was unable to repeal Obamacare fully, and the individual mandate was both unconstitutional and the lifeline of the ACA, changing the law requiring Americans to purchase health insurance was the only logical step. That is why you will no longer face a tax-penalty for lack of health coverage in 2019.

Why Obamacare Required Health Insurance In The First Place

If you’re asking yourself why health insurance was mandatory in the first place, here’s the breakdown.

The Affordable Care Act sought to provide coverage for every American, regardless of income-level or pre-existing condition. In fact, the new healthcare laws forbid providers on the exchange from rejecting applicants due to pre-existing conditions or even charging more. For many, this was the first time affordable health insurance would be available to them.

However, this would inevitably mean health insurance companies would be taking on more of a financial burden. To remedy this, the Obama administration did two things, help subsidize the added expenses, and increase the amount of young and healthy individuals entering the risk pool by making health insurance mandatory for everyone.

It used to be that health insurance companies can deny applicants based on medical history, age, or any number of factors, or charge them an exorbitant amount of money for coverage. This would essentially create a win-win situation for insurers by allowing them to create a very low-risk pool of members.

Now, health insurers have a mix of healthy individuals and unhealthy individuals. To ensure that more healthy Americans enter the risk pool to help offset the costs of those with pre-existing or chronic health conditions, health insurance was required for everyone.

Exceptions Under The Affordable Care Act

Remember, Obamacare was called the Affordable Care Act, meaning the plans were supposed to be inexpensive for everyone. There were still some that couldn’t afford health insurance though, which is why there were also exceptions to the rule.

While the aim was to provide universal healthcare in the US, the actual law was about insurance, not healthcare per se. The reality is that there is a long list of exemptions, so many people are not actually subjected to the so-called mandate. Here are some of the most basic exemptions to the mandatory health insurance rule:

  • Homelessness
  • Incarceration
  • Your income is so low that you aren’t required to file a tax return.
  • You had coverage for at least nine months out of the year.
  • You belong to a Native American tribe.
  • Religious objection
  • You were unable to find affordable health insurance costing no more than 8.13 percent of your income.
  • You are here in the US illegally.
  • You participate in a healthcare sharing ministry.
  • You qualify for a hardship exemption.

That last item is fairly vague and subject to a judgment call. If you want a hardship exemption from mandatory health insurance, you will need to apply for it through the administrator of your state’s healthcare marketplace. Here are some examples of personal hardships that may qualify:

  • Eviction
  • Foreclosure
  • Bankruptcy
  • You received a utility shut-off notice.
  • Extensive property damage from fire, flood et al.
  • You were a victim of domestic violence.
  • Your state didn’t expand Medicaid and you otherwise would have qualified.
  • Death in the family.

This is not a comprehensive list. If you had any significant life events that constituted a financial hardship resulting in loss of health insurance, you may qualify for an exemption. It wouldn’t hurt to apply.

Will Health Insurance Be Required Again?

Under President Trump, or any future Republican president for that matter, no, health insurance will most likely never be mandatory again. However, if a Democratic president were to take office, or any progressive candidate were to win, we may see the individual mandate make a comeback.

There are some states that are keeping the individual mandate alive though. For example, the District of Columbia, New Jersey, and Massachusetts all have their own versions of the mandate requiring residents to enroll in a health insurance plan. Vermont will soon join them in 2020, and other states like California are working on similar legislation as well.