California Enacts Individual Health Insurance Mandate and Penalties for Noncompliance

On June 27, 2019, California Gov. Gavin Newsom signed into law Senate Bill 78, which imposes a state-wide minimum essential coverage individual mandate, among other things. Beginning January 1, 2020, all California residents must maintain minimum essential health insurance coverage for themselves and their dependents each month unless otherwise exempted. Some exemptions include financial hardship, religious objection, undocumented individuals, members of an Indian tribe, incarcerated individuals, individuals who are a bona fide resident of another state for that month, and certain others listed in the statute. A California resident who is not otherwise exempt may face tax penalties for each month of noncompliance.

What does this mean for employers? In order to enforce this mandate, the state must know which individuals had health insurance coverage for the year and which did not. Insurance carriers (or employers, if self-funded) are obligated to report certain information to both the policyholder/employee and the State Franchise Tax Board. Failure by either the insurance carrier or employer to submit copies of such information can result in a penalty of $50 per return per covered participant.

California employers are encouraged to inform new hires during the orientation process that if the employer offers health insurance, employees should take advantage to avoid noncompliance, unless otherwise exempted under the law. Please contact Employers Council for more information.