Did You Know There’s a Penalty for Not Offering Health Insurance (in Some States)?

Think offering health insurance is optional?In some states, skipping coverage for your employees could cost you more than just top talent—it could trigger financial penalties, too.

While the federal employer mandate under the Affordable Care Act (ACA) applies only to businesses with 50 or more full-time employees, several states have their own laws that require individuals—and sometimes employers—to meet specific health insurance requirements.

Where Are Employer Health Insurance Penalties in Effect?

As of now, state-level individual or employer mandates are active in the following areas:

• California – Franchise Tax Board

• Massachusetts – Health Connector

• New Jersey – Department of Banking & Insurance

• Rhode Island – HealthSource RI

• Vermont – Vermont Health Connect

• Washington, D.C. – DC Health Link

Each of these states has its own rules about:

• Whether employers must report health insurance coverage

• Whether penalties are imposed for non-compliance

• How residents or employees are taxed if they lack coverage

📍 What About Texas?

Texas does not currently have a state-level individual or employer mandate.However, Texas-based businesses are still subject to federal ACA requirements, meaning:

• If you have 50+ full-time equivalent employees, you must offer affordable health insurance or face potential penalties under the ACA Employer Shared Responsibility Provisions.

• If you have fewer than 50 employees, you're not required to offer coverage—but you may still benefit from tax credits (see: Small Business Health Care Tax Credit).

Texas businesses that employ remote workers in other states may need to comply with the laws of those employees’ home states.

Why Does This Matter for Small Employers?

Even if your business doesn’t fall under the federal ACA employer mandate, you could still face state-level obligations if:

• You employ remote workers across state lines

• You hire in states with mandates, even if you're headquartered elsewhere

• You file taxes or maintain offices in a state with additional reporting rules

👉 General Rule for All States:If your employees live in a state with a mandate, their coverage status may affect their state tax filings—even if your business is in a state like Texas that has no mandate.

To check the rules in your area or where your employees live, use the State Health Insurance Marketplace Map from Healthcare.gov.

The Real Cost of Skipping Coverage

Choosing not to offer health insurance might seem like a way to save money—but it could cost you in:

• Penalties or fees (depending on state laws and your company size)

• Employee turnover and difficulty hiring

• Lower morale and productivity

• Increased absenteeism due to unmanaged health issues

And now, with more state regulations rolling out, the risks aren’t just about your workforce—they’re also about legal and financial compliance.

How to Stay Compliant and Competitive

Whether you’re in Texas or elsewhere, here’s how to stay ahead of the curve:

1. Know where your employees live and work – Especially if you hire remotely or across state lines

2. Understand your obligations – Review both federal ACA employer responsibilities and any state-specific mandates

3. Explore your options – Consider small group plans, ICHRA setups, or ACA tax credits

4. Work with a licensed advisor – Get personalized help navigating requirements and plan options

Final Thoughts

Not all employers are legally required to offer health insurance—but in some states, choosing not to can carry a cost.Even in states like Texas, where there’s no local mandate, offering benefits can help attract and keep great employees, reduce turnover, and ensure compliance with federal laws.

Have questions about your obligations—or how to create a compliant, affordable benefits package? Let’s connect. I help businesses navigate both federal and state requirements, while building benefits plans that make sense for your goals and your budget.