The Affordable Care Act eliminated the federal individual mandate penalty starting in 2019. So individuals no longer get penalized on their federal tax returns for going without insurance. But the rules shift for employers and people in certain states—and the stakes for employers are high. I’m an expert in employee benefits compliance, so here’s who faces penalties, how they’re calculated, and how to steer clear of fines.
Employer Shared Responsibility Penalties (ESRP)
Under the ACA’s Employer Mandate, applicable large employers (ALEs) with 50 or more full-time equivalent employees must offer affordable, minimum value health coverage to at least 95% of their full-time employees and their dependents. If an ALE doesn’t comply, it triggers penalties under IRC Section 4980H. There are two types:
Penalty A: “No Coverage” Penalty
Consider Penalty A: the “no coverage” penalty. An ALE triggers this if it fails to offer coverage to at least 95% of full-time employees (and their dependents), and at least one full-time employee receives a premium tax credit through the Exchange. For 2023 and 2024, the annual penalty is $2,880 per full-time employee—excluding the first 30 employees. And here’s the kicker: it applies to all full-time employees, not just the one who got the credit.
Penalty B: “Unaffordable or Non-Minimum Value” Penalty
Now Penalty B: the “unaffordable or non-minimum value” penalty. If the employer offers coverage, but that coverage is either unaffordable—meaning the employee’s share of single coverage exceeds 8.39% of household income for 2023—or fails to provide minimum value (plan pays less than 60% of covered benefits), and a full-time employee receives a premium tax credit, then the penalty is $4,320 per employee receiving the credit (2023 amount). Note that this penalty only applies to the affected employee, not the entire workforce.
Current State-Level Individual Mandate Penalties
While the federal penalty is gone, several states and the District of Columbia have their own individual mandates with penalties. If you live or work in these areas, you may still face a fine for not having health coverage:
- California: Penalty is calculated based on income and household size, similar to the old federal formula. For 2023, the minimum penalty is $850 per adult and $425 per child, up to a cap of a percentage of household income.
- Massachusetts: The first state to implement an individual mandate. Penalties vary by income and age, but can reach up to 50% of the lowest-cost premium for a plan meeting minimum creditable coverage.
- New Jersey: Penalties mirror the former federal structure. For 2023, the flat penalty is $835 per adult and $417.50 per child, or a percentage of income, whichever is greater.
- Rhode Island: Effective 2020, penalties are similar to the federal model, with a flat fee or percentage of income.
- Vermont: A penalty applies only if you have access to affordable coverage but don’t enroll. The penalty is up to $10 per week.
- District of Columbia: Penalties range from $750 to $2,000 per year depending on income, with exemptions for financial hardship.
When Do Employees Face ACA Penalties?
For employees, the direct federal penalty is gone. But indirect penalties can still bite. If an employer fails to report coverage accurately on Form 1095-C, employees may face processing delays or errors in their tax returns. And if an employee receives a premium tax credit they weren’t entitled to due to employer non-compliance, the IRS may seek repayment.
How WellthCare Helps Employers Avoid Penalties
Employers face rising compliance burdens, and ACA reporting remains strict. The surest way to avoid penalties? Make sure all full-time employees have access to affordable, minimum value coverage. WellthCare, the first Health-to-Wealth Benefit System, helps employers meet that goal by offering $0-co-pay preventive care and rewarding each verified action with store dollars and automatic retirement contributions, reducing overall claim costs and making it easier to maintain compliant, affordable coverage. WellthCare works alongside your existing health plan as a zero-risk add-on, giving employees $0-co-pay preventive care and automatic wealth-building incentives. That lowers claims and keeps employees healthier—making it easier to meet ACA requirements. For larger employers ready to move beyond BUCA, WellthCare Complete™ offers a fully aligned, self-funded alternative that saves 30-45% while keeping you compliant. And with the WellthCare Readiness Index™, you get data-driven proof of when switching cuts costs and risk—before penalties ever become an issue.
Final Takeaway: No Federal Penalty for Individuals, But Employers Must Stay Vigilant
Bottom line: the individual mandate penalty at the federal level is gone, but employers with 50+ employees must still offer compliant coverage or face significant fines per employee per year. State-level penalties also remain in several jurisdictions. For employers, the smartest approach is to use tools like WellthCare’s ecosystem to drive down claim costs and improve employee health, making compliance both affordable and sustainable. Companies that embrace preventive, wealth-building benefits will avoid penalties—and build a stronger, more loyal workforce.