How To Apply for a Health Insurance Exemption

Penalty Exemptions Still Relevant, Even With No Penalty in Most States

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How you apply for a health insurance exemption depends on which type of exemption you qualify for. Image © Westend61/Getty Images

The Affordable Care Act’s individual mandate requires all U.S. residents to have minimum essential health insurance coverage. And from 2014 through 2018, there was a penalty for non-compliance, known as the shared responsibility payment. Although the penalty has been eliminated in most states (but not all states—more on that in a minute), there is still a need for a hardship/affordability health insurance penalty exemption, as these exemptions allow people who are 30 years old or older to purchase catastrophic health insurance.

Want Catastrophic Health Insurance? Ask the Exchange for a Hardship Exemption

When the ACA's individual mandate penalty was being assessed by the IRS, it was possible to obtain an exemption either directly from the IRS or from the health insurance exchange in your state (in most states, that's HealthCare.gov). Some exemptions could only be granted by the exchanges, some could only be granted by the IRS, and others could be obtained either way.

But there's no longer a federal penalty for being uninsured, which means the IRS is no longer granting exemptions, or even asking about your health insurance status on your tax return—that question no longer appears on the federal Form 1040 as of the 2019 tax year.

Note that if you're filing a revised or late federal tax return for a tax year when the penalty was in effect (ie, 2014 through 2018), the IRS can still grant you an exemption from the penalty if you're eligible for it.

But what if you want to buy a catastrophic health plan and you're 30 or older? You'll need a hardship exemption (these include affordability exemptions) in order to be eligible to buy a catastrophic plan, and you'll need to obtain it before you can purchase the plan—as opposed to exemptions that were intended to allow a person to avoid paying a penalty for being uninsured. Those penalties were collected after the end of the year, so it was fine to obtain the exemption after the fact.

Here's everything you need to know about how to get a hardship exemption in order to be able to purchase a catastrophic health plan if you're 30 or older. You can preview the hardship exemption application here.

Getting an Exemption If Your State Has an Individual Mandate

As of 2019, there was no longer a federal penalty for being uninsured. But Washington, DC, New Jersey, and Massachusetts had their own state-based penalties. And for 2020, California and Rhode Island have joined them (Vermont has also created an individual mandate, but does not yet have any sort of penalty for noncompliance).

With the exception of New Jersey, all of these states have their own state-run health insurance exchanges. New Jersey is the only state that uses HealthCare.gov, but that may change soon, as New Jersey is actively working towards establishing a fully state-run exchange.

All of the state-based individual mandates have exemptions available for eligible residents. And as was the case with the federal penalty, some of these exemptions can be obtained from the exchange, while others can be obtained via your tax return (but state tax return, in this case, rather than your federal return). Here's information related to exemptions for each of the states where state-based individual mandates are in effect in 2020:

If you live in an area that still has an individual mandate penalty and you think you might be eligible for an exemption, you'll want to reach out to your state tax department to make sure you understand the details and the process for claiming an exemption.

Also, be aware that California and DC both offered special enrollment periods in the spring of 2020, allowing people to sign up for 2020 health coverage (even though open enrollment had already ended) if they didn't already know about the new requirement to have health insurance. By signing up for 2020 coverage, people in those areas can avoid having to pay a penalty when they file their 2020 tax returns.

The special enrollment period in DC runs for 60 days from the date a resident files their 2019 tax return (which includes a penalty for being uninsured in 2019), or the date the person contacts DC Health Link to explain the situation and ask for the special enrollment period, whichever comes sooner.

The special enrollment period in California ended in April 2020, and also applied to people who didn't know about California's new state-based premium subsidies.

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  1. Internal Revenue Service. Individual shared responsibility provision - exemptions: claiming or reporting. Updated February 18, 2020.

  2. Healthinsurance.org. New Jersey health insurance marketplace: history and news of the state’s exchange. January 4, 2020.

  3. D.C. Office of Tax and Revenue. Special enrollment opportunity offered to uninsured district residents to get covered and minimize tax penalty. February 6, 2020.

  4. Covered California. Special enrollment period for state subsidy or penalty. February 18, 2020.