Health Insurance Hardship exemptions from the Affordable Care Act

Credit: JD Hancock via Flickr under Creative Commons

One of the controversial points of the Affordable Care Act (ACA) is its financial penalty for American citizens and American legal permanent residents who choose to go without health insurance.

This fine for being uninsured is known, perhaps euphemistically, as a Shared Responsibility Payment. The thinking behind penalizing those without health insurance goes into the wider workings of the American health insurance system.

Without going into too much detail, essentially the more people who enroll in health insurance, the cheaper health insurance is for everyone. The bigger the pool of insured people, the less risk that health insurance companies assume by offering them coverage, thus the cheaper rates.

Whatever your name for it, under the ACA those folks remaining uninsured will face an annually increasing penalty. For example in 2014, the fine for being uninsured will be $95 for each adult and $47.50 for each child, or one percent of your income whichever is higher. The fine is due when you file your 2014 taxes.

In 2015 that fine increased to $325 per adult and $162.50 per child per or 2 percent of your income, whichever is greater. For 2016 the penalty increases again to $695 per adult and $347.50 per child or 2.5 percent of your income.

Starting in 2017 the Shared Responsibility Payment will continue to increase, but it will do so according to the current rate of inflation, with the children’s penalty being equal to half of the adult penalty, and the total cost of the penalty not exceeding 2.5 percent of a person’s annual income.

$95 to $695

Looking at that $95 penalty you’re probably not worried if for whatever reason you did not purchase health insurance this year. But maybe next year, or the year after that those harsher penalties could hurt your financials around tax season.

But for many folks, despite the efforts of the ACA to make it cheaper, health insurance can still be an expensive burden. One that takes a backseat to paying bills and keeping food on the table. For this reason, the ACA includes a provision for those Americans who could not buy health insurance because of financial hardship.

Health Insurance Hardship Exemption

Those seeking a health insurance hardship exemption from the Shared Responsibility Payment must apply with the federal health insurance exchange at HealthCare.gov using this form. There are a total of 14 circumstances that qualify you for a hardship exemption. Depending on your reasons you may need to include extra documentation along with your application.

Before we take a deeper look at the 14 qualifying hardship circumstances, it’s worth noting that you only become subject to the individual mandate penalty if you are uninsured for longer than three months during the year. Depending on your situation you may qualify for a special enrollment period at the New York State Health Insurance Exchange to buy another plan.

So let’s take a deeper look at the 14 qualifying hardship circumstances below:

1. You were homeless

If you were homeless at any point during the last year then you do not need to pay a penalty for lack of health insurance. For this circumstance, you do not need to submit any supporting documents to the exchange. There is however space on the application for you to explain why you became homeless.

2 . You were evicted in the past six months or were facing eviction or foreclosure

Those who were evicted, faced eviction, or foreclosure during the last six months are exempt from the penalty for not having health insurance. When applying for this exemption you must include a copy of your eviction or foreclosure notice along with your application.

3. You received a shut-off notice from a utility

Very similar to the above circumstance, except you must include a copy of the shut-off notice from the utility along with your health insurance hardship exemption application.

4. You recently experienced domestic violence

If you were a victim of domestic violence you may also be eligible to receive a hardship exemption from the penalty. When applying for this exemption there is no additional paperwork that you must submit with the application. However, there is a space on the application for you to explain the situation.

5. You recently experienced the death of a close family member

If you experienced the death of a close family member, you may be exempt from the penalty for uninsurance. You must supply either a copy of the death certificate, a copy of the death notice from a newspaper, or a copy of another official notice of death with your application.

6. You experienced a fire, flood, or other natural human-caused disaster that caused substantial damage to your property

Here you must provide a copy of the police or fire report, insurance claim, or other document from a government agency, private entity, or a news source documenting the event along with your application.

7. You filed for bankruptcy in the last six months

If you filed for bankruptcy within the last six months then you are eligible for an exemption from the Share Responsibility Payment. Just be sure to include a copy of the bankruptcy filing along with your exemption application.

8. You had medical expenses you couldn’t pay in the last 24 months

As medical debt is one of the leading causes of bankruptcy in the United States, having a large amount of medical debt can be grounds for an exemption from the Shared Responsibility Payment. You’ll just need to include copies of your medical bills along with your application.

9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member

If you are caring for a family member and the cost of their care increased at some point during the year then you are eligible for a health insurance hardship exemption. Just attach the receipts for the cost of their care with your application.

10. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child

For this hardship circumstance make sure to include a copy of the medical support order and copies of the eligibility notices for Medicaid and CHIP showing that the child has been denied coverage.

11. As a result of an eligibility appeals decision, you’re eligible either for: 1) enrollment in a qualified health plan (QHP) through the Marketplace, 2) lower costs on your monthly premiums, or 3) cost-sharing reductions for some time when you weren’t enrolled in a QHP through the Marketplace

When applying for health insurance through the New York State Health Insurance Exchange the exchange system evaluates your eligibility for a federal health insurance subsidy. Typically these subsidies are only available to those with income between 133 and 400 percent of the current year’s Federal Poverty Line.

However, if you feel that the exchange’s decision about your subsidy eligibility was made in error you can appeal the decision. If the appeal finds that you should have received a subsidy, you are eligible for a hardship exemption from the individual mandate penalty. Just include a copy of the appeals decision with your application.

12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.

The Affordable Care Act originally intended to expand the federal Medicaid program in all 50 states to those with incomes up to 133 percent of the Federal Poverty Line. However when the Supreme Court upheld the ACA individual mandate, it made the expansion of Medicaid optional for every state. At the time of the writing only about half the states have chosen to expand their Medicaid program.

If you would have been eligible for the expanded Medicaid, but your state did not expand the program then you are eligible for a health insurance hardship exemption from the individual mandate penalty. Just include a copy of the denial of eligibility for Medicaid with your application.

13. You received a notice saying that your current health insurance plan is being canceled, and you consider the other plans available unaffordable

One of the side effects of the ACA is that it increased the minimum standard of health insurance plans in the United States. This means that every non-grandfathered health insurance plan must include coverage for a set of mandated medical services, known as essential health benefits.

Since many existing health insurance plans did not include coverage for all of these services, they were canceled by the companies offering them. They were replaced by ACA-compliant plans. The downside of this increase in coverage is that it also increased the price of health insurance plans. If your plan was canceled and you believe the price for a new ACA-compliant health insurance plan is too much, you may be eligible for a hardship exemption. You must include a copy of your original cancellation notice with your application.

14. You experienced another hardship in obtaining health insurance

 If you experienced another hardship not listed here in obtaining qualified health insurance and believe you should be exempted from the penalty then you can apply for the exemption and describe your circumstances in the application.