What Is a Health Insurance Exemption?

Woman calculating her taxes will pay no penalty if she has a health insurance exemption.
If you're uninsured, getting a health insurance exemption will help you avoid the tax penalty for going without health insurance. RyanJLane/Getty Images

From 2014 through 2018, there was a nationwide requirement that most people maintain health insurance, and a penalty for non-compliance. As of 2019, there is still such a requirement (and penalty) in New Jersey, Massachusetts, and the District of Columbia, and Vermont will join them in 2020.

A health insurance exemption allows you to avoid paying the tax penalty for being uninsured. If you get a health insurance exemption, you don’t have to buy health insurance coverage during the time you’re exempt, and you won’t be penalized for being uninsured.

In most states, there is no longer a penalty for being uninsured in 2019 and beyond. But the requirement that people maintain health insurance does technically still apply, which means the exemption process is still in place. And it's still important in some cases, because one type of exemption (a hardship exemption) is necessary for a person age 30 or older to be allowed to buy a catastrophic health plan.

In the states that have implemented their own health insurance mandates and penalties, exemptions allow people to avoid paying the penalty, despite being uninsured.


The individual mandate, part of the Affordable Care Act, says all legal residents of the United States have to have health insurance coverage or they’ll face a tax penalty called the shared responsibility payment. However, the law also says some people are exempt from the individual mandate and its penalty.

The shared responsibility payment applied to people who were uninsured during the time from 2014 through 2018, although it was repealed as of the start of 2019, under the terms of the Tax Cuts and Jobs Act. So at the federal level, there is no longer a tax penalty for being uninsured, although people who were uninsured in 2018 still have to pay a the penalty (unless they qualify for an exemption) when they file their 2018 tax return in 2019.

But for 2019 and beyond, unless you're in a state that has implemented its own mandate requiring residents to have health insurance, you don't need to worry about obtaining an exemption, unless you want to have the option to purchase a lower-cost catastrophic health plan.

Who’s Exempt From Health Insurance?

You can learn more about who’s exempt from the mandate to buy health insurance in “Can You Get a Health Insurance Exemption?” For people filing 2018 tax returns and seeking an exemption, all of those rules still apply. Most of the eligibility guidelines for a health insurance exemption are straightforward without gray areas. For example, you’re either a member of a Native American tribe, or you’re not. You’re either a member of a health care sharing ministry, or you’re not.

However, one type of health insurance exemption, the hardship exemption, is a little more flexible in defining who’s eligible. The hardship exemption is meant for folks having financial difficulties or dealing with situations that make it difficult to get or afford health insurance.

Didn’t get health insurance from a health insurance exchange because you were on the run from an abusive partner? Didn’t get coverage because your house was swept away by a hurricane? Didn't get coverage because you used the money to keep your electricity or water from being cut off? The hardship exemption was made for you. Learn who’s eligible for a hardship exemption in “How To Get a Hardship Exemption From Health Insurance.”

In 2018, the federal government made it easier for people to qualify for hardship exemptions by expanding the eligibility guidelines. Under the new rules, people can obtain a hardship exemption if they live in an area where just one insurer offers plans and the lack of choice "has precluded them from obtaining coverage." There's also a hardship exemption available if all the plans in a given area include abortion coverage and that runs counter to the person's values. And there's a catchall hardship exemption for people who "experience personal circumstances that create a hardship in obtaining health insurance coverage." The example given for this particular circumstance involves a situation in which a person needs to see a certain specialist for ongoing treatment, but the specialist is not in-network with any affordable health plans that the person could purchase.

All of this is still pertinent, even though there's no longer a penalty for being uninsured in most states, because hardship exemptions allow a person to buy a catastrophic health plan, even if they're age 30 or older (without a hardship exemption, catastrophic plans can only be purchased by people under the age of 30).

How Do You Apply for an Exemption?

A few health insurance exemptions are automatic and don’t require any type of application or action on your part. Some exemption types can be claimed when you file your yearly federal income taxes. To receive other exemptions, you have to apply with your state’s health insurance exchange. Learn more about which types of exemptions are automatic, which are claimed when filing your taxes, and which require an application in, “How To Apply for a Health Insurance Exemption.”

Learn how to contact your state’s health insurance exchange on HealthCare.gov’s marketplace finder page.

If you're applying for a hardship exemption for the 2018 tax year, you can do so via your tax return, without having to first get an exemption certificate number from the health insurance exchange in your state. That's according to guidance that was issued by the federal government in 2018.

For 2019 and beyond, if you're applying for a hardship exemption in order to obtain a catastrophic plan, you'll want to file your exemption request via the exchange, so that you can gain access to a catastrophic plan during open enrollment (if you wait and do it on your taxes, you obviously won't be able to go back and obtain catastrophic coverage for the year that has already passed). If you're in a state that has its own health insurance mandate, you'll need to check with the state to see exactly what you need to do in order to obtain an exemption. For the most part, state-based rules for exemptions are similar to the ACA's rules, but there are some local differences.

Why Apply for a Health Insurance Exemption Now?

Although you can technically apply for a health insurance exemption at any time, it's smart to apply during open enrollment, or as soon as you meet the exemption requirements. Once you have a hardship exemption, you'll be eligible to apply for less expensive catastrophic health insurance even if you didn't meet the requirements to apply for this type of health insurance before.

While catastrophic health insurance has its drawbacks, it allows you to get preventive care without paying for it, and it covers you should a really expensive health care disaster strike. The only people who ​qualify to buy it normally are those under 30 years old. However, if you get a hardship exemption, you're automatically eligible to buy catastrophic health insurance even if you're 30 or older. Keep in mind, however, that premium subsidies cannot be used with catastrophic plans, so you'll be paying the full premium yourself. For this reason, catastrophic plans are usually only a good option for people who wouldn't qualify for premium subsidies anyway, based on their income or other circumstances.

How Many People Get Exemptions?

The IRS reported in early 2017 that about 6.5 million tax filers owed a shared responsibility penalty on their 2015 tax returns, while 12.7 million filers claimed an exemption (including the exemptions that are obtained via the marketplace, as well as the exemptions that are claimed on the tax return).

The following year, for 2016 tax returns, the IRS reported that 10.7 tax filers had claimed exemptions by April 27, 2017. At that point, only 4 million tax returns had included a penalty for being uninsured in 2016.

So although a substantial number of people have paid the penalty over the years, far more people have been eligible for an exemption.

In 2019 and beyond, people no longer need to claim an exemption on their federal income tax return, since there is no longer a penalty. But obtaining a hardship exemption via the health insurance exchange will continue to allow people to purchase catastrophic plans, if that's their choice. And in a few states, there will still be a penalty, assessed on state tax returns, for people who are uninsured. In those states, the exemption process will still be important for people who have a valid reason for being uninsured and want to avoid the penalty.

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