Under the Affordable Care Act (ACA), it used to be required for most people to have health insurance that qualifies as minimum essential coverage or pay a federal tax penalty for going without. The only way to avoid the penalty was to:
- Be enrolled in minimum essential coverage – you could be uninsured for a single period of up three months in a year, or
- Qualify for an exemption.
As of Jan. 1, 2019, this changed. The federal tax penalty was eliminated1, and you will not owe it if you go without health insurance that qualifies as minimum essential coverage. (Some states have passed or may pass their own individual mandates and impose their own tax penalties.)
You may still need information about exemptions as they relate to filing your 2018 federal income taxes or applying for a Catastrophic health insurance plan if you’re over 30. If you’re in a situation where you are uninsured in 2019, you may not owe a penalty, but you may still want to consider coverage options to help pay for healthcare throughout the year.
Do ACA exemptions still apply?
For coverage year 2019 and beyond, you don’t need an exemption unless you’re 30 or older and want to enroll in Catastrophic health insurance.2
The ACA’s many health coverage exemptions still apply to coverage year 2018 and years prior. If you are preparing to file your 2018 federal income taxes, you may still have some questions about exemptions and which ones applied to you in the last year. We’ll cover several below.
What are the exemptions from the ACA mandate?
There are many ACA exemptions. We’re going to cover 12 of them here, including how they are categorized and how the IRS suggests you claim or apply for one.3
|ACA Exemption||Category4||How to Get It5|
|1. Coverage is considered unaffordable||Affordability||Claim on tax return|
|2. Short Coverage Gap||Health coverage-related||Claim on tax return|
|3. Citizens living abroad and certain noncitizens||Other||Claim on tax return|
|4. Aggregate self-only coverage considered unaffordable||Affordability||Claim on tax return|
|5. Resident of a state that did not expand Medicaid||Health coverage-related||Claim on tax return|
|6.Members of a healthcare sharing ministry||Group Membership||Claim on tax return|
|7. Members of Indian Tribes||Group Membership||Claim on tax return|
|8. Incarceration||Hardship||Claim on tax return|
|9. Members of certain religious sects||Group membership||Claim on tax return|
|10. General hardship||Hardship||Marketplace|
|11. Coverage considered unaffordable based on projected income||Affordability||Marketplace|
|12. Determined ineligible for Medicaid in a state that did not expand Medicaid||Health coverage-related||Marketplace|
Affordability (income-related) exemptions
In some circumstances, health insurance may be considered unaffordable. This includes situations in which:
Your income doesn’t meet tax-filing requirements—this amount varies by age and filing status.
For the 2017 tax year, filing thresholds were $10,400 for single individuals under age 65 and $20,800 for those who were married and filing jointly.6
Visit IRS.gov for a complete list of filing status thresholds, and talk with a tax professional to discuss whether or not you need to file taxes.
There are additional life situations that can make it financially or logistically difficult to buy health insurance, and the ACA places them in a category called hardship exemptions.
- Eviction or facing eviction or foreclosure
- Receiving a shut-off notice from a utility company
- Domestic violence
- The death of a family member
- Experiencing a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
- Filing for bankruptcy
- Having medical expenses that you couldn’t pay that resulted in substantial debt
- Unexpected increases in necessary expenses due to caring for an ill, disabled or aging family member
- Claiming a child as a tax dependent who’s been denied coverage for Medicaid and CHIP, and another person is required by court order to give medical support to the child; in this case you don’t have to pay the penalty for the child
- As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace in 2017
- You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid in 2018 under the Affordable Care Act
- The exemption for “grandfathered” individual insurance plans is no longer available for 2017 and later
- You had another hardship. If you experienced another hardship obtaining health insurance, use this form at HealthCare.gov to describe your hardship and apply for an exemption.
Religious and group exemptions
Members of certain groups may qualify for an exemption from the mandate, including those who belong to a recognized healthcare sharing ministry, recognized religious sect with religious objections to insurance, or a federally recognized tribe.
There are additional exemptions, which include serving a prison or jail term, living abroad, adopting a family member and the death of a member of your tax household.
How do you get an exemption?
Depending on the exemption you qualify for, you will need to either claim it on your tax return or have it granted by HealthCare.gov or a state health insurance exchange. The table at the top of this article briefly explains where to get each type of exemption, but you will also want to speak with a tax professional or contact HealthCare.gov or your state-based health insurance marketplace.
Claimed on your tax return
In most cases, exemptions are claimed on IRS Form 8965, Health Coverage Exemptions, when you file your tax return.9 If you use tax software, you will receive the form after answering a series of questions about health insurance.
Once you fill it out, that’s it. Your exemption has been claimed, and no further action is needed unless requested by the IRS or your tax professional.
What if you are not required to file a tax return?
If your income is below the filing threshold, then you are automatically exempt and no action is needed.10 If you are not required to file a tax return and do so anyway, you will use Part II of Form 8965, Coverage Exemptions for Your Household Claimed on Your Return, and you will not make a penalty payment.
Read the IRS article “Individual Shared Responsibility Provision – Exemptions: Claiming or Reporting,” for additional details.
Granted by HealthCare.gov or a state exchange
Exemptions granted by a Marketplace include the following; click on each to see instructions and forms on HealthCare.gov:
- General hardship (Starting with coverage year 2018, you have the option to claim this exemption without submitting documentation when you file your 2018 federal tax return; however, if you prefer to apply and submit documentation you may do so as instructed at HealthCare.gov.11)
- Religious and group membership
If your state does not use the HealthCare.gov platform, visit your state’s exchange website or contact your state’s exchange for application information.
If you have questions about whether or not you qualify for an exemption and how to get one, contact your state’s health insurance exchange. For tax-related help, contact a tax professional.
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No coverage in 2019? How will you pay for healthcare?
Exemptions and tax penalties may not be a concern for 2019, but you’ll still need a way to pay for healthcare—expected or unexpected.
Without health insurance, you could end up paying for everything from a visit to the doctor’s office to a multi-day hospital stay 100% out of pocket. There are many coverage options available to meet your budget and healthcare needs; you may want to:
1. Purchase alternative coverage
Consider a short term health insurance plan or hospital indemnity plan. Alternative health insurance options are available year-round. They may have lower premiums than major medical insurance; however, they do have fewer benefits and do not include all of the essential health benefits. Alternative health insurance policies are not guaranteed issue, so you will need to apply for coverage and be approved to enroll.
2. Enroll in ACA-compliant health insurance
Major medical insurance is guaranteed issue and provides the most comprehensive coverage, including all of the ACA’s essential health benefits. If you buy this coverage through HealthCare.gov or a state-based exchange, you may even qualify for income-based subsidies that help lower your premium and out-of-pocket medical expenses.
However, you will need to qualify for a special enrollment period if you want to buy major medical insurance outside of the annual open enrollment period. To become eligible for special enrollment, you must have a qualifying life event such as getting married or divorced, having a child or losing minimum essential coverage.
3. See if you qualify for other minimum essential coverage
Not all minimum essential coverage is major medical insurance. Medicaid and Medicare are also considered minimum essential coverage, and they are available year-round if you meet eligibility criteria.
Visit the Centers for Medicare & Medicaid Services for more information.
Summary + next steps
With the federal tax penalty repeal, you don’t need an exemption to go without minimum essential coverage in 2019 and beyond. Exemptions still apply for 2018, and you may be able to claim or apply for one when filing your 2018 federal income taxes.
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