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California Exchange Plans > Penalties

The Health Care Reform Penalty

Understand the Requirements and How to Avoid the Penalty

According to the mandate of the Affordable Care Act, nearly every American will be required to have health insurance coverage in 2014. If January 1, 2014 comes and you are neither insured nor eligible for an exemption from obtaining health insurance, you will be subject to a Health Care Reform penalty. 

Penalty for Individuals in 2014: The Greater of 1% of Income or $95 Per Person

For individuals, the annual penalty starts out at the greater of 1% of your annual income or $95 per person. Each year, the penalty will increase.
  • 2014: The penalty is $95 per adult and $47.50 per child up to $285 for a family, or 1% of the family income, whichever is greater.
  • 2015: The penalty is $325 per adult and $162.50 per child up to $975 for a family, or 2% of the family income, whichever is greater.
  • 2016 and After: The penalty is $695 per adult and $347.50 per child up to $2,085 for a family, or 2.5% of the family income, whichever is greater. Note: after 2016, the penalty will be increased annually by a cost of living adjustment.
In the beginning, some Americans may choose to be uninsured (or to get coverage without the essential benefits) and just pay the penalty. However, as the penalty increases year by year, more and more Americans are expected to comply with the mandate and get coverage that includes the essential benefits.

Penalty for Businesses of 101+ Employees: $2,000 Per Employee Per Year

Large companies with 101 or more employees are required to offer health benefits to their employees. Non-compliance would involve a penalty of $2000 for each full-time equivalent employee after the first 30 employees. For example, a large company with 101 employees could be penalized $2000 for 71 employees, for a total penalty of $142,000 per year if they are in non-compliance with the Health Reform law. 

Note: Small businesses with fewer than 101 employees are not required to offer health insurance, so small companies are not subject to a penalty if they do not offer health benefits. 
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