You went without health insurance for a few months this year — between jobs, between plans, or just betting you would stay healthy. On your federal return, that gap costs you nothing. But if you live in California, Massachusetts, New Jersey, Rhode Island, or Washington, D.C., the same gap can cost you hundreds or even thousands of dollars on your state return. And if you run a business with employees in any of those places, you may owe the state paperwork you have never heard of, with its own penalties for skipping it.
Here is how the state mandates work, what each one charges, who is exempt, and the employer reporting sitting behind them.
The Federal Mandate Is Gone — the Requirement Is Not Your Problem Anymore
The Affordable Care Act's individual mandate once required nearly every American to carry minimum essential coverage or pay a penalty: the greater of 2.5% of household income or a flat $695 per adult ($347.50 per child). The Tax Cuts and Jobs Act of 2017 zeroed that penalty out starting with the 2019 tax year. The mandate language technically remains on the books, but with a $0 penalty it has no bite.
Congress only defanged the individual side. The ACA's employer mandate is still fully in effect: businesses with 50 or more full-time-equivalent employees must offer minimum essential coverage to at least 95% of full-time employees or face federal penalties. And five states plus the District of Columbia decided not to let the individual requirement die — they built their own versions, with real penalties collected through the state tax return.
The Five States (Plus D.C.) That Still Charge You
Each mandate state runs its own calculation. The amounts below are for the 2025 tax year (the return you file in early 2026), the most recent year with published figures everywhere. Expect inflation adjustments each year.
California: $950 per Adult
California's penalty is the greater of a flat amount or 2.5% of gross household income above the state filing threshold. For 2025, the flat amount is at least $950 per uninsured adult and $475 per uninsured dependent child. The penalty is prorated by month, so a three-month gap costs roughly a quarter of the full-year figure, and it cannot exceed the statewide average premium for a bronze-level Covered California plan.
The Franchise Tax Board (FTB) assesses the penalty when you file your state return, and it publishes an Individual Shared Responsibility Penalty Estimator so you can preview the damage before you file. Short gaps of three consecutive months or fewer are exempt.
Massachusetts: The Original, With Its Own Sliding Scale
Massachusetts has enforced an individual mandate since 2007 — it predates the ACA entirely. Coverage must meet the state's Minimum Creditable Coverage (MCC) standards, which are stricter than the federal definition in some respects, and you prove it on Schedule HC attached to your state return.
The 2025 penalty is a monthly sliding scale based on income, assessed only on adults:
| Income (as % of federal poverty level) | Annual penalty per adult |
|---|---|
| 150% or below | No penalty |
| 150.1%–200% | $300 |
| 200.1%–250% | $588 |
| 250.1%–300% | $876 |
| 300.1%–400% | $1,356 |
| 400.1%–500% | $1,584 |
| Above 500% | $2,244 |
No one under 18 owes the penalty, and a coverage gap of three or fewer consecutive months is forgiven. The penalty can never exceed half the lowest-cost plan available to you through the Massachusetts Health Connector.
New Jersey: $695 to $4,908 per Person
New Jersey essentially cloned the old federal formula. For 2025, an uninsured individual owes between $695 and $4,908 depending on income and the number of uninsured months, with the household total rising for each additional uninsured family member. Like the old federal penalty, it is the greater of a flat per-person amount or 2.5% of income above the filing threshold, capped at the average bronze-plan premium.
Rhode Island: The Federal Formula, Frozen in Place
Rhode Island also mirrors the former federal penalty: the greater of 2.5% of annual household income or $695 per uninsured adult and $347.50 per uninsured child, capped at the state average bronze-plan premium. You report coverage on Form IND-HEALTH with your Rhode Island return, and any penalty either shrinks your refund or increases your balance due.
Washington, D.C.: The Highest Flat Amount
The District's 2025 penalty is the greater of 2.5% of household income above the federal filing threshold or $795 per uninsured adult and $397.50 per uninsured child, with a family cap of $2,385. That flat amount is the highest in the country, so high earners with a full-year gap feel D.C.'s version the most.
Vermont and Maryland: Report, but No Penalty
Two more states ask about coverage on the tax return without charging you for the answer. Vermont requires residents to indicate their insurance status when filing, and Maryland includes a checkoff that routes uninsured filers toward Medicaid or subsidized marketplace coverage through its easy-enrollment program. Neither imposes a financial penalty. Several other states run similar easy-enrollment checkoffs. Treat the question as a nudge, not a bill.
Exemptions: When You Do Not Owe
Every mandate state excuses some people. The details vary, but these categories show up nearly everywhere:
- Income below the filing threshold. If you earn too little to have to file a return, you generally owe no penalty.
- Unaffordable coverage. If the cheapest available plan would cost more than a set share of your household income (around 8%, adjusted annually), the gap is excused.
- Short gaps. A break in coverage of three consecutive months or less is exempt in California and Massachusetts, and similar short-gap relief exists elsewhere.
- Hardship. Homelessness, eviction, domestic violence, natural disaster, bankruptcy, and similar events qualify, usually with an application or attestation.
- Religious conscience and tribal membership. Members of recognized religious sects opposed to insurance and members of federally recognized tribes are exempt.
- Nonresidents and part-year residents. Most states prorate or waive the penalty for months you lived elsewhere — important if you moved mid-year.
Do not assume you qualify; claim the exemption on the return or through the state's application process. An unclaimed exemption is the same as no exemption when the notice arrives.
The Employer Side: State Reporting You Cannot Ignore
Here is the part small-business owners miss. These mandates are enforced with data, and much of that data comes from employers and insurers filing coverage reports with the state — not just the IRS.
The federal baseline still applies
If you have 50 or more full-time-equivalent employees, you are an Applicable Large Employer under the still-alive federal employer mandate. You must file Forms 1094-C and 1095-C with the IRS and furnish 1095-C statements to employees. Miss that, and federal penalties apply on top of anything the states want.
Four states piggyback on the federal forms
California, New Jersey, Rhode Island, and D.C. all accept the federal Forms 1094 and 1095 (B and C) for state purposes — but you must file copies with the state agency separately. Filing with the IRS does not satisfy the state. Typical deadlines for the 2025 coverage year:
| State | Furnish to employees by | File with state by |
|---|---|---|
| California (FTB) | Early February | March 31 (automatic extension to May 31) |
| New Jersey | Early March | March 31 |
| Rhode Island | Early March | March 31 |
| Washington, D.C. | Early March | April 30 |
The trigger is where your employees live, not where your business sits. A Texas company with one remote worker in Sacramento owes California a filing for that worker. California backs its deadline with a penalty of $50 per individual whose coverage information goes unreported — small per head, but it scales across a workforce fast.
Massachusetts does its own thing
Massachusetts predates the ACA plumbing, so it kept its own forms. Employers and insurers must furnish Form MA 1099-HC to Massachusetts residents and file it with the state by January 31 — earlier than every other mandate state. On top of that, employers with six or more Massachusetts employees must file the Health Insurance Responsibility Disclosure (HIRD) form. If Massachusetts is new territory for your payroll, the January deadline is the one that bites first.
What this means for small employers in practice
Even if you are far below the 50-employee federal threshold, you likely still touch this system: your insurer files 1095-B forms for fully insured plans, and if you are self-insured at any size, you file them yourself. Confirm with your payroll provider or benefits broker — in writing — who files the state copies and for which states. "We handle ACA reporting" often means federal only until you ask.
What to Do Before Year-End
Whether you are protecting your own return or your employees' filings, run through this checklist:
- Confirm continuous coverage. If anyone in your household has a gap longer than three months in a mandate state, price a marketplace plan now. A few months of premiums is often cheaper than the penalty.
- Track part-year moves. If you moved into or out of a mandate state, document the dates. Most states prorate by month of residency.
- Gather last year's 1095s. Forms 1095-B and 1095-C are your proof of coverage. If one never arrived, request it from the insurer or employer before filing season.
- Calendar the state deadlines. If you sponsor a plan covering residents of mandate states, put the January-through-April state filing dates on next year's compliance calendar now, separate from the federal ones.
- Ask your payroll provider the explicit question. "Do you file state individual-mandate copies for CA, MA, NJ, RI, and DC?" Get the answer in writing.
- Keep exemption paperwork. Hardship and affordability exemptions need documentation. File it with the tax year's records, not in a desk drawer.
Accurate books make all of this cheaper. Premium payments, HSA contributions, and any penalty paid all flow through your records, and clean payroll headcounts are what prove whether you are above or below the 50-employee line. When the records are already right, mandate season is a filing exercise instead of a reconstruction project.
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