The Patient Protection and Affordable Care Act or Obamacare was put into place to overhaul the healthcare system in the US. In the most basic sense, it was signed into law by President Barack Obama in 2010 to give Americans access to quality and affordable health insurance, reduce the number of uninsured citizens through the expansion of public and private insurance coverage and minimize the costs of healthcare for US residents and the government. With Obamacare, those who have low wages or a pre-existing condition can sign up for healthcare insurance.
The Affordable Care Act (ACA) has three main provisions, and one of which is the individual mandate. Basically, this provision requires every American citizen to have health insurance coverage or they will have to pay a penalty. This provision was put in place so citizens can benefit from the two other provisions provided by ACA: Medicaid expansion and insurance exchanges.
The individual mandate also exists as a way of encouraging Americans to buy health insurance even if they don’t want to because they feel they’re wasting their money on premiums. A lot of health economists do believe that premiums can be kept at a low price if many Americans do sign up for Obamacare.
But despite the ACA being a requirement for all, there are cases when one can be exempted. Keep in mind that those who do not want to buy insurance will be given a tax penalty, and the cost for not carrying coverage is $395 (for 2015) or 2% of income, whichever value is higher. By 2016, that penalty will rise to $695 or 2.5% of income.
Although there have been complaints about the legality of the individual mandate, ultimately in 2012 the Supreme Court ruled that the provision was constitutional.
Then again, you can avoid a tax penalty if you qualify for an exemption. To apply for an exemption, you have to fill out a form and wait for confirmation. It’s also important to note that some exemptions do require you do provide documentation as proof.
Qualifying for an Exemption
Going to healthcare.gov and signing up for a marketplace account is one of the easiest ways to qualify for an exemption. Once you have signed up, you can check which exemptions you qualify for.
Here are some facts about the exemptions:
- There are around 20 exemptions, some of which require documentation while others don’t.
- There are exemptions that last throughout the year while others are just good for three months.
- There are exemptions that allow you to qualify for a catastrophic health plan or a special enrollment period.
- There are exemptions that don’t need to be applied for in advance and can be claimed on your 1040.
- Several of the exemptions need an Electronic Confirmation Number (ECN), but when this isn’t given on time, you can indicate “PENDING” in place of the ECN.
List of Obamacare Exemptions
1. You can’t afford coverage.
You might find this confusing given that the ACA was put into place to allow those who can’t afford health insurance to get one. That said, this exemption specifically refers to citizens who cannot afford to pay more than 8% of their household income for the year.
With Obamacare, there are four different types of health insurance plans you can apply for: bronze, silver, gold and platinum. The minimum amount you can buy is the bronze level health plan. But if you can’t pay for either employer-sponsored coverage or a bronze level health plan, then you can qualify for an exemption.
2. Your income is below the filing threshold.
The IRS sets the minimum required threshold for filing taxes, and if you fall below the requirement then you automatically qualify for an exemption.
3. You have gone without coverage for less than three consecutive months.
You don’t need to pay a fee for the months when you have gone without coverage. This exemption benefits those who are experiencing a life change, be it going through a career shift or moving to another state. Also called the short coverage gap, this is only applicable to the first gap in the year. So if you have more than one in a given year, the exemption will only reflect for the first one.
4. You are a member of a religious organization opposed to accepting insurance benefits.
The religious sect you belong to needs to have been in existence since December 31, 1950. In addition, the organization needs to be recognized by the Social Security Administration as being against accepting insurance benefits, including Medicare and Social Security.
5. You are a member of a recognized health care sharing ministry.
The health care sharing ministry you belong to should be a non-profit as described under 501(c)(3), as well as exempt from tax under 501(a). In addition, the members of this ministry should share a common ethical or belief system, and they share medical expenses among themselves based on those beliefs. Also, the organization should have been in place since December 31, 1999.
6. You are a member of a federally recognized Indian tribe.
Included in the list of federally recognized Indian tribes is the Alaska Native Claims Settlement Act Corporation Shareholder. This kind of exemption also applies if you are eligible for services through an Indian healthcare provider or the Indian Health Service.
7. You are not lawfully present.
You are exempt if you are an undocumented citizen, not legally an American citizen, an American national or a foreigner lawfully present in the US.
8. You are incarcerated.
If you are in jail, prison or any other similar penal institution or correctional facility, then you are exempt.
9. You are deemed by the health insurance marketplace as having suffered a hardship making you unable to purchase coverage.
There are several circumstances that allow you to qualify for a hardship exemption. Some of these require you to have documentation as evidence while others don’t. Here’s the list of exemptions you can qualify for:
- You were homeless.
- You were evicted in the past six months or were facing eviction or foreclosure.
- You have received a shut-off notice from a utility company.
- You have experienced domestic violence recently.
- You have experienced a death in the family (a close family member) recently.
- You have experienced a disaster (fire, flood, or any other natural human-caused disaster) that led to substantial damage to your property.
- You have filed for bankruptcy in the last six months.
- You had medical expenses you weren’t able to pay in the last 24 months.
- You have experienced a rise in unexpected expenses because you were caring for an ill, disabled or aging family member.
- You are expecting to claim a child as a tax dependent but that child was denied Medicaid and the Children’s Health Insurance Program coverage, and the court ordered that another person is required to provide medical support for the child.
- You are eligible for the following as a result of an eligibility appeals decision:
- enrollment in a qualified health plan (QHP) through the Marketplace.
- lower costs on monthly premiums.
- cost-sharing reductions for a period where you were not able to enroll in a QHP through the Marketplace.
- You have been deemed ineligible for Medicaid because the state you live in didn’t expand eligibility under the ACA.
- You have received a cancellation notice from your current health insurance plan, and you cannot afford the other available health insurance plans.
- You experienced another hardship in getting health insurance.