Health Insurance Exemption Criteria—Why They Still Matter

There's No Longer a Federal Penalty, But Exemptions Are Still Useful

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The Affordable Care Act includes a provision—often referred to as the individual mandate—that requires nearly all Americans to maintain minimum essential health coverage. From 2014 through 2018, that requirement was enforced with a penalty tax called a shared responsibility payment. People who didn't have minimum essential coverage had to pay a penalty—assessed on their tax returns—unless they qualified for an exemption.

As of 2019, there is no longer a federal penalty for not having minimum essential coverage. The requirement to have health insurance coverage is still applicable, but the mechanism for enforcing it (ie, the penalty) was eliminated after the end of 2018 by the Tax Cuts and Jobs Act.

The penalty was still assessed in 2019, when people who didn't have minimum essential coverage (or an exemption) in 2018 filed their 2018 tax returns. But when 2019 federal tax returns are filed in early 2020, they will no longer include tax penalties for being without minimum essential coverage.

State-Based Individual Mandates

Residents in New Jersey, Massachusetts, and the District of Columbia are still subject to a penalty for not having health insurance in 2019, and that will also be the case in Vermont as of 2020.

These states have established their own minimum essential coverage requirements, exemption criteria, and enforcement penalties. Most are closely based on the federal requirements and the federal penalty that applied until the end of 2018. We've kept a list of the federal exemptions below, but people who are subject to state-based insurance mandates and penalties will need to double-check the exemption criteria specific to their state to see if they're eligible for an exemption.

Hardship Exemption Still Necessary If You're 30+ and Want a Catastrophic Plan

Although residents of most states no longer need to worry about obtaining an individual mandate exemption in order to avoid a penalty, people who are 30 or older still need a hardship exemption if they want to be able to purchase a catastrophic health insurance plan.

In 2018, the federal government expanded the criteria for hardship exemption eligibility, making it easier for more people to qualify. Hardship exemption application forms are available here. The federal health insurance marketplace has an overview of hardship exemption criteria for people who are 30+ and wish to purchase catastrophic health insurance.

In addition to the specific hardships that are listed, an affordability exemption also counts as a hardship exemption for the purpose of being allowed to purchase catastrophic health coverage. As of 2019, an affordability exemption is available if the lowest-cost metal-level health plan or employer-sponsored health plan available to you would cost more than 8.3 percent of your household income, after any applicable premium subsidies or employer contributions are applied (if you have access to an employer-sponsored plan, the coverage is considered affordable—meaning your employer is in compliance with the employer mandate and you're not eligible for premium subsidies in the exchange—if your portion of the premium doesn't exceed 9.86 percent of your household income; this is not quite the same thing as eligibility for an affordability exemption though, which is why the numbers are a little different).

Who Is Exempt From the Individual Mandate’s Penalty?

Although there is no longer a federal tax penalty for being uninsured as of 2019, the exemption criteria are still important if you're filing a prior's year's return or amending a return.

You’re likely exempt from the individual mandate health insurance penalty if you:

  • Aren’t in the United States legally, OR you live mostly outside the U.S. (for at least 330 days per year)
    • This also applies if you are a resident of Guam, American Samoa, Northern Mariana Islands, Puerto Rico, or the US Virgin Islands, and you don’t have a closer connection to the United States or a foreign country than you do to the US possession where you’re claiming residency.
  • Are in jail or prison, unless you're incarcerated pending disposition of charges.
  • Are an Alaskan Native or a member of an Indian Tribe.
  • Have a small enough income that you’re not required to file income taxes
  • Have a religious objection to insurance
    • To qualify for this exemption:
      • You must be a member of a recognized religious sect.
      • You have to waive all of your Social Security benefits
      • The Commissioner of Social Security must agree that your religion opposes insurance for things like death, disability, and medical care
      • The Commissioner must find that members of your religion have made arrangements to provide for their dependent members since they aren’t using insurance as a safety-net.
      • The sect must have been in existence continuously since December 31, 1950.
  • Are a member of a health care sharing ministry.
    • Health care sharing ministries are religion-based groups of people who assist each other with paying medical bills. You can learn more about health care sharing ministries from The Alliance of Health Care Sharing Ministries. In order to be exempt from the individual mandate penalty, your health care sharing ministry must have been in existence since 12/31/1999, although new members can join at any time. Additionally, the ministry's yearly accounting audits must be available to the public.
  • Can’t afford coverage (this is still applicable in 2019 and beyond for people who are at least 30 years old and wish to purchase a catastrophic health plan)
    • To be considered unaffordable, the lowest-cost bronze plan in the exchange in your area must cost more than 8.30 percent of your household income in 2019 (new guidelines on this are published annually; the 2019 number was published in the 2019 Notice of Benefit and Payment Parameters). The premium is based on total costs after any premium tax credits (premium subsidies) are applied, so if you're eligible for premium subsidies, it's very unlikely that you'd qualify for an affordability exemption. If you're not eligible for premium subsidies, however, you may be eligible for an affordability exemption. In areas with particularly expensive insurance, even people with fairly robust incomes can be eligible for an affordability exemption.
  • Have gone less than three consecutive months without coverage
    • You’re only allowed to use this exemption once per year, and only the first occasion each year is exempted. For example, if you’re uninsured for one month in February and then again for one month in August, you'll only be exempt from the penalty for February. You'll owe the shared responsibility penalty for August. And the gap in coverage has to be for a duration of fewer than three months—two months is ok, but three months without coverage would result in a penalty for all three months.
  • Have a hardship that legitimately prevents you from getting health insurance (this is still applicable in 2019 and beyond for people who are 30 or older and wish to purchase a catastrophic health plan)
  • You would have been eligible for Medicaid if your state had expanded Medicaid (this counts as a hardship for people who are 30 or older and wish to purchase a catastrophic plan)
    • If you're in a state that has not expanded Medicaid and the only reason you're deemed ineligible for Medicaid is that your state hasn't expanded to the ACA's eligibility guidelines, you're eligible for an exemption from the penalty. This includes people in the Medicaid coverage gap (ie, with income below the poverty level), but it also includes people with income between 100 percent and 138 percent of the poverty level, who are eligible for premium subsidies in the exchange but who would be eligible for Medicaid instead if their state had accepted federal funding to expand Medicaid coverage.
  • You’re a volunteer with AmeriCorps, VISTA, or the National Civilian Community Corps
    • These organizations provide their volunteers with short-term health insurance that isn't considered minimum essential coverage and would not otherwise fulfill the ACA's individual mandate. But the exemption means that there's no penalty for these volunteers.

How Do I Get a Health Insurance Exemption?

Although the 2018 tax filing season is over and future tax seasons will not include a federal penalty for being uninsured in the foreseeable future, you might still need to apply for an exemption if you're filing a prior year's return or amending a return.

Your state health insurance exchange is responsible for granting some exemptions, while others must be claimed on your tax return. The IRS has a webpage that explains how each exemption can be obtained.

If you're planning to use an exemption that must be claimed on your tax return, the exchange can answer questions and help you determine whether you're likely to qualify for the exemption. In some cases, a very similar exemption can be obtained in advance from the exchange, to avoid having to wait until you file your taxes.

If your exemption is due to having a small enough income that you don't have to file federal income taxes, you don't actually have to apply for the exemption; it's automatic. If you file taxes even though you don't have to, for example, because you want to get a refund, you won't have to pay the penalty tax.

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