California Individual Mandate & Reporting Requirements

 

Effective since 2020, California imposes a state individual mandate that requires individuals in California to maintain minimum essential coverage (MEC) or pay a penalty. The California law largely mirrors the federal individual mandate requirement under the Affordable Care Act (ACA) that was effectively eliminated, beginning in 2019. To help administer the individual mandate, California law imposes a reporting requirement on every entity that provides MEC to an individual during a calendar year, similar to the ACA’s reporting requirement under Internal Revenue Code Section 6055.

 

MINIMUM ESSENTIAL COVERAGE

 

For purposes of the California individual mandate, minimum essential coverage (MEC) generally has the same definition as under the ACA. The following types of health coverage qualify as MEC:

 

 

Examples of products that do not qualify as MEC include coverage only for vision care or dental care, or coverage only for a specific disease or condition. Individuals can contact their health plans to determine if their coverage qualifies as MEC.

 

THE PENALTY AMOUNT

 

California’s individual mandate penalty is calculated in the same manner as the ACA’s individual mandate. The penalty is the greater of two amounts—the flat dollar amount (adjusted annually) or the percentage of income amount (2.5% of income). The flat dollar amount is $900 for 2023. For purposes of calculating the penalty, income is the taxpayer’s household income for the taxable year over the state income tax filing threshold for the taxable year.

Families will pay half the penalty amount for children, up to a family cap of three times the annual flat dollar amount. Also, the penalty is capped at the California state average of the annual bronze plan premium. The California Franchise Tax Board provides a penalty estimator.

 

AFFECTED INDIVIDUALS

 

The requirement to maintain MEC applies to individuals of all ages (including children), unless that individual falls within a specific exception or is exempt. An individual is treated as having coverage for a month if he or she has coverage for any one day of that month. The following categories of individuals are exempt from the California individual mandate:

 

An individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.

 

REPORTING REQUIREMENT

 

To help administer the individual mandate, California law imposes a MEC information reporting (MEC IR) requirement on every entity that provides MEC to an individual during a calendar year (similar to the ACA’s reporting requirement under Internal Revenue Code Section 6055).

Information returns must be provided to individuals receiving MEC by Jan. 31, and no extensions are available. Insurance providers are required to report health coverage information to the California Franchise Tax Board (FTB) annually by March 31 or face a penalty. The penalty for not reporting is $50 per individual who was provided health coverage. However, no penalty will apply if the return is filed on or before May 31. Employers are similarly required to report insurance information to FTB by March 31, but only if their insurance providers do not report to FTB.

The California instructions for filing federal Forms 1094-B, 1095-B, 1094-C and 1095-C provide that the same federal forms submitted to the IRS can be provided to the FTB.