How to Get a Hardship Exemption from Health Insurance Mandate

Avoid the Penalty for Being Uninsured & Qualify for a Catastrophic Plan

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Nasos Zovoilis/Stocksy United

If you live in the United States and didn’t have health insurance in 2018, you’ll face a tax penalty when you file your 2018 return, unless you get a health insurance exemption. The Tax Cuts and Jobs Act, enacted in December 2017, eliminated the individual mandate penalty starting in 2019, but there is still a penalty for being uninsured in 2018 (assessed on 2018 tax returns, filed in 2019).

People who are uninsured in 2019 no longer face a penalty from the IRS (although there is still a penalty in Massachusetts, DC, and New Jersey, and Vermont will join them in 2020). But the individual mandate itself still exists, and the hardship exemption 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).

Most of the criteria that qualify you for a health insurance exemption are cut and dry. Either you're a Native American, or you’re not. Either you belong to a health care sharing ministry, or you don’t. Either the lowest-cost plan available in your area is considered affordable, or it's not (affordability is based on a set percentage of your income; in 2018, it was 8.05 percent of your income). To review these cut-and-dry criteria, check out " Can You Get a Health Insurance Exemption?"

The one exemption criterion that has some wiggle room is the hardship exemption—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 from the ACA's individual mandate.

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 living expenses. That increase in your essential expenses makes 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 circumstance 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 if one of the following things prevented 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 (note that although this is on the list of things that can qualify a person for a hardship exemption, the IRS also has a separate category for penalty exemptions for people in this situation).
  • Your child may be eligible for a hardship exemption if someone is court-ordered to provide medical support. The person mandated to provide the medical support can't be the same person who claims the child as a tax dependent. The child must be determined ineligible for Medicaid and the Children's Health Insurance Plan. Lastly, the exemption is only good for the months that the medical support order is in effect.
  • You may be eligible for a hardship exemption to cover the months you didn't have health insurance if an eligibility appeals decision determined that you should have been eligible during those months.
  • 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, although 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).

Here's an example of how this might work. You were exempt because your premium for the lowest cost health plan on the exchange was more than 8.05 percent of your income in 2018 (this number is adjusted annually for inflation). You were initially turned down for a subsidy to help you pay for health insurance, but you appealed the decision about the subsidy. Meanwhile, you didn't have health insurance.
Eventually, you won your appeal and you got the premium subsidy, so you could afford health insurance. However, this means the exemption you had because health insurance was too expensive is retroactively invalid now. So, you can apply for a hardship exemption to cover the months you didn't have health insurance because you were waiting on the appeal.
This appeals decision can be about whether you were eligible for enrollment in a health insurance exchange health plan, eligible for advanced payments of a premium tax credit subsidy, or eligible for a cost-sharing subsidy.

To learn why you'd be exempt because the premium for the lowest cost health plan on your exchange would have been more than 8.05 percent of your income in 2018, or the range of other exemptions available, read this article. You'll learn about ways to qualify for an exemption from the individual mandate that don't include claiming a hardship (this is still relevant for people who were uninsured in 2018 and facing a tax penalty on their 2018 return).

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. The time limit will impact the duration of your hardship exemption. For example, if you were evicted in January, you'd have a hardship exemption from January through June, but you would have needed to get health insurance by July or you'd be facing the tax penalty.

If an exemption expires at a time when your health insurance exchange isn't accepting applications for health insurance because it's not open enrollment, don't worry. Your expiring exemption makes you eligible for a special enrollment period

Likewise, if the situation that qualified you for the hardship exemption ceases to exist, for example, you're no longer homeless, you'll be eligible for a special enrollment period to sign up for health insurance.

How to Get the Hardship Exemption

If you think you might be eligible, apply for a hardship exemption through your health insurance exchange (for the 2018 tax year, you can apply for a hardship exemption directly with the IRS, instead of having to get an exemption certificate number from the exchange prior to filing your tax return).

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. You can preview the hardship exemption application the federal health insurance exchange uses so you'll know what information you need to gather.

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