Business/Mgmt & Tax Concepts

California Healthcare Mandate

November 25, 2019

California enacted a new healthcare mandate to reduce the number of uninsured families and reduce overall healthcare costs. The law mandates that all California residents have health insurance, and takes effect January 1, 2020.

General overview:

  • The law requires California residents to have qualifying health insurance throughout the year
  • For most, this will result in no change, as qualifying health insurance includes employer-sponsored health insurance, coverage through Covered California, direct (private) insurance, Medicare, and Medicaid
  • Those without qualifying coverage may face a penalty
  • There are a number of exceptions to the penalty, including but not limited to, a California resident living abroad or coverage gaps of 3 months or less
  • Open enrollment runs from 10/15/2019 through 1/31/2020 in California

Penalty outline:

  • The penalty is based on filing status and income
    • Individual | annual income < $45,500 | estimated penalty of $695
    • Married couple | annual income < $91,000 | estimated penalty of $1,390
    • Family of 4 | annual income < $140,200 | estimated penalty of $2,085
  • Penalties, if applicable, will be reported on the 2020 California tax return (filed in Spring 2021 or later, with extension) or via tax notice if the Franchise Tax Board (FTB) finds you are subject and did not report it
  • Exemptions to abate the penalty can be claimed when filing the 2020 California tax returns in Spring 2021 (or later, with extension)

Important employer information:

  • The FTB will develop a reporting form including the covered individual’s (and dependents’) information
  • Using the Federal 1095-A, -B, and -C will more than likely meet the reporting requirement
  • Employers should coordinate with insurance carriers and self-insured medical plan vendors to ensure compliance
  • Employers may notify employees who opt to not use the employer-sponsored coverage of the requirement

Please contact our team if you have any questions whatsoever.