It depends on who you are and how many employees you have. For most individuals, the federal penalty for being uninsured is now $0. For employers, the story is different: the Affordable Care Act (ACA) imposes real financial penalties for not offering compliant coverage. Getting this right matters for both compliance and your bottom line.
For Individuals: The Federal Mandate Penalty is Zero (But States Differ)
The ACA's individual mandate penalty was effectively repealed starting in 2019, so there's no federal penalty for going uninsured. Several states (Massachusetts, New Jersey, California, Rhode Island, and D.C.) still have their own mandates, and if you live in one of them you could owe a state tax penalty. Vermont also has an individual mandate, but it carries no financial penalty, only a reporting requirement.
For Employers: The ACA's Employer Mandate Carries Significant Penalties
For applicable large employers (ALEs), generally those with 50 or more full-time equivalents, the ACA's employer shared responsibility provisions are still in effect. These rules require ALEs to offer affordable, minimum-value coverage to full-time employees and their dependents. Messing up can trigger two types of penalties: 4980H(a) and 4980H(b).
Penalty A: Failure to Offer Coverage to Substantially All Full-Time Employees
Penalty A kicks in if you don't offer coverage to at least 95% of your full-time employees, and a single employee gets a Marketplace tax credit. The cost: the number of full-time employees minus 30, multiplied by $3,340 (2026 figure), assessed monthly. That adds up fast.
Penalty B: Offering Unaffordable or Inadequate Coverage
Penalty B applies when you do offer coverage to 95% or more, but that coverage is unaffordable or lacks minimum value, and an employee gets a tax credit. For 2026, coverage counts as unaffordable when the employee's share of self-only premiums exceeds 9.96% of household income, up from 9.02% in 2025. The fine: $5,010 per employee per year (2026). It's more targeted than Penalty A, but still painful.
How the 2026 Subsidy Changes Affect Penalty Exposure
A 4980H penalty applies only when a full-time employee actually receives a Marketplace premium tax credit. That trigger changed at the start of 2026. The enhanced premium tax credits enacted in 2021 and extended through 2025 expired on December 31, 2025, and eligibility reverted to the original ACA rules, which cap credits at 400% of the federal poverty level. Households above that line no longer qualify for subsidies, so they drop out of the pool of employees who can trigger a penalty. This narrows the exposure pool, but it doesn't remove the obligation. Lower-income employees still qualify for credits, and the IRS raised both penalty amounts for 2026. Employers should rerun their affordability math rather than assume last year's numbers still hold.
Beyond the ACA: Other Legal and Financial Risks
Beyond the ACA, skipping employee health benefits opens up other legal and financial dangers:
- ERISA Fiduciary Liability: If you offer a plan, you carry fiduciary duties under ERISA. Skipping benefits avoids those duties, but you give up tax advantages and recruiting power.
- State & Local Mandates: More cities and states are creating their own play-or-pay rules with separate penalties. San Francisco's Health Care Security Ordinance, for example, requires employers with 20 or more workers to spend a minimum amount on healthcare per hour worked. Don't assume federal compliance is enough.
- Competitive Disadvantage & Talent Retention: Not a government penalty, but a real business cost. In a tight labor market, benefits are table stakes. Absent them, you'll see higher turnover, recruiting costs, and lower morale.
The WellthCare Perspective: Turning Compliance into a Strategic Advantage
Penalties are only part of the story. Smart companies look past the minimum and ask how benefits can build health, wealth, and loyalty. That's where WellthCare comes in. WellthCare pairs preventive care with automatic wealth-building: reward dollars at the WellthCare Store and automatic retirement contributions. This tackles the root causes of high claims and costs. The result is reduced long-term risk, better employee financial wellness, and stronger retention, turning a compliance checkbox into a strategic asset. Healthcare that pays you back.
The individual federal penalty is $0. But employers ignore the ACA at their own risk. The smarter move: treat benefits as an investment in your workforce rather than a line-item cost. Still, rules vary by company size and location. Talk to a compliance expert or broker.
This article is for general information only and is not legal, tax, or medical advice. Employers should consult their own advisors.