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There are some pretty significant changes coming down the road for next year in California related to health insurance laws, focusing on mainly two huge changes for 2020:

1. There is going to be a new state subsidy program that is aimed at helping over 235,000 Californians who would not have qualified for federal assistance before.
2. The “individual mandate tax penalty” will be put in place again, which means that Californians who don’t want to purchase qualified health insurance are going to face a penalty of either 2.5% of their (annual) income or $695/adult ($347.50/child).

What is this “individual mandate tax penalty”?

Even though the individual mandate penalty no longer exists at the federal level, legislation is enacted that restores it at the state level for 2020.  California is joining four other states that have put this in place.

According to reviews, restoring this mandate in California is a driving factor in lower premiums, on average 3.2% lower.  Also, it’s estimated that Californians are going to save on average $167 per year on their premiums during 2020.

Now, if customers that can afford health insurance but choose not to get it may be subject to a tax penalty, part of their state tax filing.  The penalty, mentioned above, is expected to raise about $1 billion over the next three years and will be used to fund the new subsidy program California is putting into place for 2020.

Why are they creating this new program?

The new program is meant to put a cap on how much a Californian will pay for their health insurance premium (compared to their income).  The way it was before, those families who made above 400% of the federal poverty line (FPL) weren’t able to get premium tax credits.  In 2020, those who make 400-600% of the FPL are eligible for these subsidies.

How can you avoid this tax penalty?

You have to have the minimum essential coverage.  If you ever dip below that, even if it’s for a few months, you might be subject to the penalty.  The best way to avoid this is to purchase health insurance during open enrollment (10/15 through 1/15).