How to Get a Hardship Exemption from Health Insurance Mandate

Hardship Exemptions Still Necessary If You Want a Catastrophic Plan

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Nasos Zovoilis/Stocksy United

From 2014 through 2018, Americans who didn't have minimum essential health coverage had to pay an additional tax to the IRS when they filed their tax returns, as they weren't in compliance with the Affordable Care Act's individual mandate. That continued to apply in 2018 (for tax returns that were filed in 2019) but as a result of the Tax Cuts and Jobs Act, there is no longer a federal tax for being without health insurance (there are some states with their own individual mandates, and they assess their own penalties for non-compliance).

People who are uninsured in 2019 no longer face a penalty from the IRS. But the individual mandate itself still exists, and the hardship exemption from the individual mandate is still important in that it allows a person age 30 or older to purchase a catastrophic health plan. Without a hardship exemption, these plans are only available for enrollees under age 30.

Hardship exemptions are less cut-and-dried than the other individual mandate exemptions that were used during the years when there was a penalty for being uninsured. Hardship exemptions are available for a variety of circumstances, and the Trump administration has taken steps to make it easier for more people to qualify for a hardship exemption.

Here’s what you need to know about how to get a hardship exemption that will allow you to enroll in a catastrophic health plan.

Hardship Exemption—The Basics

There are three basic ways to qualify for a hardship exemption from the individual mandate:

  1. Something happened to you that unexpectedly increased your essential expenses and made you unable to get health insurance.
  2. The cost of buying health insurance would cause you to be deprived of food, shelter, clothing, or other necessities.
  3. Some other circumstances legitimately prevented you from getting health insurance, or made the purchase of health insurance a burden that the government considers legitimate.

Hardship Exemption—The Details

Since the basic rules are pretty broad, the federal government provides guidelines to help health insurance exchanges figure out how to apply the rules to the individuals and families asking for hardship exemptions. Here’s a plain-language, unofficial summary of those guidelines.

Your state’s health insurance exchange is allowed to give you a hardship exemption—which you can then use to enroll in a catastrophic health plan—if one of the following things would otherwise prevent you from getting health insurance:

  • You're homeless.
  • You've been evicted within the last six months.
  • You're facing eviction or foreclosure.
  • You've gotten a shut-off notice from your utility company.
  • You've filed for bankruptcy within the last six months.
  • You have a lot of debt due to medical expenses from the past 24 months.
  • Caring for an ill, disabled, or aging family member unexpectedly increased your essential living expenses.
  • You recently experienced domestic violence.
  • A close family member recently died.
  • You recently had a fire, flood, or another disaster that caused substantial damage to your property.
  • You are ineligible for Medicaid only because your state didn't expand Medicaid coverage as instructed by the Affordable Care Act. The Supreme Court ruled that states didn't have to expand their Medicaid eligibility if they didn't want to. If your state chose not to expand Medicaid coverage but you would have been eligible if it had expanded Medicaid, you may be eligible for a hardship exemption.
  • The lowest-cost plan available in the exchange in your area is considered unaffordable, after any applicable premium tax credits are applied (so in almost all cases, this will only apply to people who are not eligible for premium tax credits). In 2019, coverage is considered unaffordable if the premium for the lowest-cost plan would be more than 8.3% of your income. For 2020, coverage will be considered unaffordable if the lowest-cost plan's premiums would be more than 8.24% of your income.
  • All of the plans available in the exchange in your area include coverage for abortion, and you are philosophically opposed to that (this exemption was added in April 2018).
  • There are no plans available in the exchange in your area (this exemption was added in April 2018; this situation has never occurred and appears unlikely to occur in the future, but several areas were in danger of this possibility for 2018).
  • There is only one insurer offering plans in the exchange in your area and you "can show that the resulting lack of choice has precluded [you] from obtaining coverage under a [qualified health plan]." (this exemption was added in April 2018).
  • You experience a hardship based on the options available to you and your specific medical needs. For example, if you need to have access to a particular specialist for a medical condition and none of the health plans available in the exchange in your area include that specialist in their networks. (this exemption was added in April 2018).

The Devil's in the Details

There are a few important points about the above guidelines that might impact your decision to apply for a hardship exemption.

First, the hardship described in the guidelines has to have prevented you from getting health insurance. For example, although the recent death of a close relative may be on the guidelines, you're unlikely to get the hardship exemption if that relative was a half-brother you'd never met and his death had no impact on your financial situation or your ability to accomplish the tasks of day-to-day life. When you complete the exemption paperwork, you'll have to explain how the specific circumstances prevented you from obtaining health insurance.

And second, many of the guidelines have time limitations such as the guideline providing a hardship exemption if you've been evicted within the last six months. So while you may qualify for a hardship exemption and be eligible for buy a catastrophic plan during a given year, you might not be eligible to renew that plan for the following year, depending on the circumstances that made you eligible for a hardship exemption in the first place.

How to Get the Hardship Exemption

If you're 30 or older, want to buy a catastrophic health plan, and think you might be eligible for a hardship exemption, apply for one through your state's health insurance exchange. In most states, that's HealthCare.gov. DC and 12 states have their own state-run exchanges, but they use HealthCare.gov's hardship exemption application process, and all except Connecticut use HealthCare.gov's affordability exemption process.

[Some exemptions—including hardship exemptions for 2018—could be obtained from the IRS, but those were for exemptions that were being used when people filed their tax returns, to avoid the penalty for not having coverage during the previous year. The exchange can grant the exemption prospectively, before the start of the year, so that you can use the exemption in order to enroll in a catastrophic health plan.]

If you're trying to get a hardship exemption to allow you to purchase a catastrophic plan, you'll want to get the ball rolling on that process in advance of open enrollment (November 1 through December 15 in most states) so that you'll have your exemption certificate available when you're ready to enroll. Making this work can be a challenging process, given the length of time it can take to receive the exemption, the timing of when affordability exemption forms become available for the coming year, and the short enrollment window that applies to plans in the individual market. A local broker or enrollment assister will be able to provide help and advice with the process of obtaining a catastrophic plan via a hardship exemption.

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Article Sources

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  1. Norris, Louise. healthinsurance.org. Will you owe a penalty under Obamacare?

  2. Federal Register. Department of Health and Human Services. Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019. April 17, 2018.

  3. Federal Register. Department of Health and Human Services. Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020. April 25, 2019.

  4. Department of Health and Human Services. Center for Consumer Information and Insurance Oversight. Guidance on Hardship Exemptions from the Individual Shared Responsibility Provision for Persons Experiencing Limited Issuer Options or Other Circumstances. April 9, 2018.

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