No Health Insurance? You May Qualify for an Obamacare Exemption

Finding Health Insurance, Health
affordable care act exemptions

The Affordable Care Act, also called Obamacare, requires you to have health insurance or pay a tax penalty — but there are exceptions.

This could be music to your ears if you can’t afford a health plan or didn’t sign up for one before the open enrollment deadline. You could be eligible for an exemption from the individual mandate, the part of the law that requires you to have health insurance.

Many small businesses are also exempt from the employer mandate, which requires companies to provide health insurance to employees. However, even if your company doesn’t provide health insurance, you aren’t automatically off the hook.

To avoid paying a penalty for not having health insurance come tax season, understand the types of exemptions and whether you qualify for one.

Individual mandate exemptions

 

Here are the ways you can be exempt from the requirement to buy health insurance:

  • Your lack of insurance coverage was for three months or less.
  • You aren’t required to file a tax return because your income is too low.
  • You are incarcerated.
  • You are in the U.S. illegally.
  • You are part of a Native American tribe.
  • The least expensive health insurance available to you costs more than 8.13% of your 2016 income in premiums.
  • You are a member of a health care sharing ministry.
  • Your religion objects to insurance.
  • You qualify for a hardship exemption.

The first five exemptions on the list will be automatically applied when you file your tax return for the year you went without insurance (if you’re required to file a return). Except for the hardship exemption, the others will take some legwork for you to apply and qualify. You can find out how to do that at Healthcare.gov.

Hardship exemptions

Hardship exemptions are different from others because they are often temporary and sometimes exempt you from the individual mandate for less than a year. That means that even if you don’t have to pay the full tax penalty for not having insurance this year, you might have to pay part of it, and you may not qualify again next year.

In most cases, you’re exempt from having insurance only during the time you were affected by the hardship. For example, if your utilities were shut off, you’re exempt from having insurance only for the months you were affected by the shut-off.

You may qualify for a hardship exemption if:

  • You faced eviction or foreclosure in the past six months.
  • You filed for bankruptcy in the past six months.
  • You were homeless.
  • A utility company sent you a shut-off notice.
  • A flood, fire or other disaster caused significant property damage to your home.
  • You are a recent victim of domestic violence.
  • You were ineligible for Medicaid because your state didn’t expand Medicaid.
  • Your health insurance was canceled for reasons other than nonpayment of premiums, and the plans offered in the marketplace are unaffordable.
  • You had significant and unexpected increases in expenses while caring for an ill, disabled or elderly family member.
  • A close family member recently died.
  • Following an appeals decision, you are now eligible for lower-cost health insurance coverage, but went without it while appealing.
  • Another person is required to provide medical support to your child, making you not responsible for the child’s penalty.
  • You encountered “other hardships” in trying to get health coverage, determined case by case.

Unlike the first list of exemptions, these are often vague descriptions. The government handles these individually, so if you think you qualify you’ll have to apply. You can go to Healthcare.gov to find out.

Once you apply for any of these exemptions, it’s up to the marketplace administrators to determine whether you qualify, which can take some time. You’ll have better luck at a quick turnaround if you submit your application before open enrollment starts. If you qualify, you’ll be mailed an exemption certificate number; if your application is denied, you can appeal that decision.

If you don’t have health coverage and won’t qualify for an exemption, we have one recommendation: Start saving up now for the tax penalty.

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: lacie@nerdwallet.com. Twitter: @LacieWrites.