The Affordable Care Act (“Obamacare”) requires that, subject to some exceptions, all Americans have minimally adequate health insurance coverage in 2014. You have until March 31, 2014 to obtain health coverage and avoid the penalty for 2014.
Those that don’t comply with the individual health insurance mandate will be subject to a moneteary penalty. For 2014, the penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1% of income, whichever is greater. Thus, for example, a single person with an income of $46,000 in 2014, would have to pay a $358 penalty. You’re supposed to pay the penalty along with your taxes when you file your 2014 return. However, several groups of people are exempt from the mandate and the penalty.
Types of Exemptions
You may be eligible for an exemption if any of the following apply to you:
- you cannot afford coverage
- obtaining coverage would result in certain hardships for you
- you are not a U.S. citizen, U.S. national, or an alien lawfully residing in the U.S.
- you don’t have to file a tax return for 2014 because your income is below the tax filing threshold ($10,000 for individuals and $20,000 for a couples filing jointly)
- you are unable to qualify for Medicaid because your state has chosen not to expand the program
- you participate in a health care sharing ministry or are a member of a recognized religious sect with objections to health insurance
- you are a member of a federally recognized Indian tribe, or
- you are in prison.
The most significant exemptions are based on income. Anyone who would have to pay more than 8% of his or her household income to obtain the minimal coverage required by law is exempt. For example, if your annual out-of-pocket cost for the least expensive coverage obtainable through your state exchange is $5,500, you'll be exempt if your household income is less than $68,750. (To determine your out-of-pocket cost, you must subtract the amount of any premium credits for which you qualify.) This exempts many older self-employed people from the penalty, because they pay more for health insurance than younger people.
You can also apply for a hardship exemption to the mandate if you have experienced difficult financial or domestic circumstances that prevent you from obtaining coverage–for example, homelessness, death of a close family member, bankruptcy, substantial recent medical debt, or disasters that substantially damaged your property. You may also apply for a hardship exemption if obtaining coverage would be so burdensome as to cause you to experience other serious deprivation of food, shelter, or other necessities. Check your state health insurance exchange marketplace for more information about hardship exemptions.
How To Obtain an Exemption
To obtain some types of exemptions, you must apply through your state health insurance exchange; for others, you must apply when you file your taxes. Some exemptions can be claimed either way.
The religious conscience exemption and most hardship exemptions are available only by going to your health insurance exchange and applying for an exemption certificate.
The exemptions for members of Indian tribes, members of health care sharing ministries, and those in prison are available either by going to your state exchange and applying for an exemption certificate or claiming the exemption on your income tax return.
The exemptions for unaffordable coverage, certain hardships, and individuals who are not lawfully present in the United States can be claimed only as part of filing a federal income tax return. The exemption for those under the federal income tax return filing threshold is available automatically.
Links to all 50 state exchanges are available at: www.healthcare.gov/what-is-the-marketplace-in-my-state.