If you live in the United States and don’t have health insurance, you’ll be punished with a tax penalty unless you get a health insurance exemption.
Several criteria may qualify you for a health insurance exemption, but most of them are cut and dry. Either you’re an American Indian, or you’re not. Either you belong to a health care sharing ministry, or you don’t.
The one exemption criterion that has some wiggle room is the hardship exemption. Here’s what you need to know.
Hardship Exemption—The Basics
There are three basic ways to qualify for a hardship exemption from health insurance:
- Something happened to you that unexpectedly increased your essential living expenses. That increase in your essential expenses makes you unable to get health insurance.
- The cost of buying health insurance would cause you to be deprived of food, shelter, clothing, or other necessities.
- Some other circumstance legitimately prevented you from getting health insurance.
Hardship Exemption—The Details
Since the basic rules are pretty broad, the federal government provides guidelines to help health insurance exchanges figure out how to apply the rules to the individuals and families asking for hardship exemptions. Here’s a plain language, unofficial summary of those guidelines.
Your state’s health insurance exchange is allowed to give you a hardship exemption if one of the following things prevented you from getting health insurance:
- You're homeless.
- You've been evicted within the last six months.
- You're facing eviction or foreclosure.
- You've gotten a shut-off notice from your utility company.
- You've filed for bankruptcy within the last six months.
- You have a lot of debt due to medical expenses from the past 24 months.
- Caring for an ill, disabled, or aging family member unexpectedly increased your essential living expenses.
- You recently experienced domestic violence.
- A close family member recently died.
- You recently had a fire, flood, or other disaster that caused substantial damage to your property.
- You are ineligible for Medicaid only because your state didn't expand Medicaid coverage as instructed by the Affordable Care Act. The Supreme Court ruled that states didn't have to expand their Medicaid eligibility if they didn't want to. If your state chose not to expand Medicaid coverage but you would have been eligible if it had expanded Medicaid, you may be eligible for a hardship exemption.
- Your child may be eligible for a hardship exemption if someone is court-ordered to provide medical support. The person mandated to provide the medical support can't be the same person who claims the child as a tax dependent. The child must be determined ineligible for Medicaid and the Children's Health Insurance Plan. Lastly, the exemption is only good for the months that the medical support order is in effect.
- You may be eligible for a hardship exemption to cover the months you didn't have health insurance if an eligibility appeals decision made you eligible during those months.
Here's an example of how this might work. You were exempt because your premium for the lowest cost health plan on the exchange was more than eight percent of your income. You were initially turned down for a subsidy to help you pay for health insurance, but you appealed the decision about the subsidy. Meanwhile, you didn't have health insurance.
Eventually, you win your appeal and you get the premium subsidy, so you can afford health insurance. However, this means the exemption you had because health insurance was too expensive is retroactively invalid now. So, you can apply for a hardship exemption to cover the months you didn't have health insurance because you were waiting on the appeal.
This appeals decision can be about whether you were eligible for enrollment in a health insurance exchange health plan, eligible for advanced payments of a premium tax credit subsidy, or eligible for a cost-sharing subsidy.
To learn why you'd be exempt because the premium for the lowest cost health plan on your exchange is more than eight percent of your income, check out "Can You Get a Health Insurance Exemption?" You'll learn about ways to qualify for a health insurance exemption that don't include claiming a hardship.
The Devil Is In the Details
There are a few important points about the above guidelines that might impact your decision to apply for a hardship exemption.
First, the hardship described in the guidelines has to have prevented you from getting health insurance. For example, although the recent death of a close relative may be on the guidelines, you're unlikely to get the hardship exemption if that relative was a half-brother you'd never met and his death had no impact on your financial situation or your ability to accomplish the tasks of day-to-day life.
Second, the health insurance exchange run by the federal government uses these guidelines, but your state's exchange might not. Each state's exchange is allowed the flexibility of determining its own situation-specific guidelines as long as they provide exemptions to people who meet one of the three basic criteria. They don't have to use these same exact guidelines to determine which situations cause people to meet one of the three basic criteria.
Third, many of the guidelines have time limitations such as the guideline providing a hardship exemption if you've been evicted within the last six months. The time limit will impact the duration of your hardship exemption. For example, if you were evicted in January, you'd have a hardship exemption from January through June, but you'd need to get health insurance by July or you'd be facing the tax penalty.
If an exemption expires at a time when your health insurance exchange isn't accepting applications for health insurance because it's not open enrollment, don't worry. Your expiring exemption makes you eligible for a brief special enrollment period. These usually last for 30 days.
Likewise, if the situation that qualified you for the hardship exemption ceases to exist, for example, you're no longer homeless, you'll be eligible for a special enrollment period to sign up for health insurance.
How To Get the Hardship Exemption
If you think you might be eligible, apply for a hardship exemption through your health insurance exchange. Preview the hardship exemption application the federal health insurance exchange uses so you'll know what information you need to gather, but remember that your state's application may be different.
Find contact information for your state's health insurance exchange.
Cohen, Gary, CMS Deputy Administrator and Director Center for Consumer Information and Insurance Oversight. Guidance on Hardship Exemption Criteria and Special Enrollment Periods http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/exemptions-guidance-6-26-2013.pdf