Penalty

A penalty in the health insurance context typically refers to the individual shared responsibility payment, the tax penalty imposed under the ACA for not having minimum essential coverage. At the federal level, this penalty was effectively eliminated starting in 2019 (reduced to $0), but several states and Washington, D.C. still enforce their own individual mandate penalties.

If you live in a state with an active individual mandate, like California, Massachusetts, New Jersey, Rhode Island, Vermont, or D.C., you may owe a state penalty if you went without qualifying health coverage during the year. The penalty amount varies by state but is generally calculated as either a flat dollar amount per person or a percentage of household income, whichever is greater.

Even without a federal penalty, going uninsured is financially risky. Medical debt is the leading cause of personal bankruptcy in the U.S. A single emergency room visit can cost $2,000–$5,000+, and a hospital stay can easily reach tens of thousands. The out-of-pocket maximum on a Marketplace plan ($10,600 individual in 2026) puts a ceiling on your costs that doesn't exist when you're uninsured.

The term "penalty" also appears in other insurance contexts, like the late enrollment penalty for Medicare Part B and Part D. If you don't sign up for Medicare when you're first eligible and don't have qualifying alternative coverage, you'll pay a permanent premium surcharge when you eventually enroll.

If you're considering going without coverage to save on premiums, talk to us first. Many families qualify for subsidies that bring the cost well below what they expect, especially those who haven't checked their eligibility recently.