Individual and Family

What You Need to Know About the Changes to California Health Insurance

Updated on December 04, 2019


There are two major changes coming to California health insurance in 2020:

  • There will be a new state subsidy program that is expected to help 235,000 Californians who previously did not qualify for federal assistance
  • The individual mandate tax penalty will be reinstated which means Californians who choose not to buy qualified health insurance, will face a penalty of either $695 per adult ($347.50 per child) or 2.5% of their annual income

The restoration of the individual mandate

While the individual mandate penalty is no more at the federal level, California lawmakers have chosen to enact legislation to restore the individual mandate penalty in 2020. The penalty was nixed out by the Tax Cuts and Jobs Act of 2017, which gave way to higher premiums in 2019.
California is joining 4 other states – Massachusetts, New Jersey, Vermont, and Washington, D.C. – that have put state individual mandate laws into place.
According to Covered California, restoring the individual mandate for California is a factor in driving premiums to be, on average, 3.2% lower for the upcoming year. Additionally, Covered California estimates that this will lead to Californians saving an average of $167 per year on their premiums during the 2020 coverage year.
However, customers who can afford health insurance but choose not to purchase coverage may be subjected to a tax penalty, which will be a part of their annual state tax filing. The penalty could be 2.5 percent of household income or $696 per adult (this number will rise every year with inflation), whichever amount is larger.
The money raise from the penalties – which is expected to be about $1 billion over the next three years – will be used to fund the new subsidy program that state is putting into place in 2020.

The new subsidy program

In 2020, there will be a new state subsidy program that will help lower the cost of health insurance for low and middle-income Californians.
Previously, those who made above 400% of the federal poverty line (FPL) were not eligible for premium tax credits. In 2020, those who make between 400 to 600% of the FPL will newly be eligible for subsidies. This means that a family of four with an annual income of around $150,000 per year will be eligible for subsidies.
This program is meant to limit how much a Californian will pay for their health insurance premium as a percentage of their income, according to Covered California. For example, older individuals living in areas with high health care costs could receive large amounts of financial help.

How can I avoid the tax penalty?

In order to avoid the tax penalty, you must have the minimum essential coverage. If you go without health insurance during the upcoming coverage year – even if it’s only for a few months and not the full year – you may be subject to the tax penalty.
The best way to avoid this penalty is to purchase health insurance during the open enrollment period for the 2020 coverage year – which for California runs from October 15th 2019 through January 31st, 2020. Start shopping for individual or family coverage on!

How do I know if I qualify for a subsidy?

Typically, you will qualify for a subsidy in California if you make between 100% and 600% of the FPL. If you make less than 100% of the FPL, you may qualify for Medi-Cal. If you make more than 600% of the FPL you may not be eligible for government subsidies to help pay for your health insurance.
In order to find out if you qualify for subsidies under the new California subsidy program, you can use eHealth’s subsidy calculator while shopping for health insurance.
Subsidies are based off of the estimated amount of income that you expect to make in the upcoming coverage year.
Keep in mind that you should report changes in income throughout the year. This way if you’ve received a subsidy and experience an increase in income that disqualifies you for that subsidy, you will not have to pay that amount back at the end of the year. Additionally, if you believe that you experienced a change in income that could make you qualified for a subsidy, make sure to report it so that you don’t miss out on savings.

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