The Affordable Care Act (ACA) has an individual mandate that requires nearly all Americans to maintain minimum essential health coverage. From 2014 through 2018, that requirement was enforced with a penalty tax called a “shared responsibility payment” assessed on their tax returns. The tax penalty would be waived if the individual qualified for an exemption.  With the passage of the Tax Cuts and Jobs Act, the federal tax penalty was eliminated in 2019. The requirement to have health insurance coverage is still applicable and exemptions play an important role in two circumstances: (1) providing individuals age 30 and older access to marketplace catastrophic plans, and (2) providing residents of 5 states and the District of Columbia a means to avoid state-levied penalties for failure to have ACA-compliant health insurance (e.g., minimum essential health coverage). 

Understanding Affordable Care Act exemptions

Although there is no longer a federal tax penalty for failure to have minimum essential health coverage, you may still need to apply for an exemption if you are filing taxes for a prior year, filing an amended tax return, live in a state that mandates individuals have ACA-compliant health insurance, or wish to enroll in catastrophic coverage plan on the marketplace and you are age 30 or older.  To learn more about penalties, see our article Obamacare tax penalties. 

State-mandated individual health coverage

Residents of California, the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont face potential penalties under state-mandated individual coverage if they don’t have minimum essential health coverage and they don’t have an exemption to the requirement. You can learn more about state-mandated individual coverage here

Although the states that mandate individual coverage mirror the ACA generally, they have each made some modifications to minimum essential coverage and the exemption criteria. If you reside in one of these areas, you may wish to verify the requirements with your state marketplace.  

How do you enroll in a catastrophic health plan?

If you are under the age of 30, you can purchase catastrophic health coverage during the annual open enrollment period or, if you are eligible, during a special enrollment period. If you are 30 or older, you must apply for an exemption. There are two types of exemptions for catastrophic health plan: 

1. Hardship exemption
2. Affordability exemption 

What is an Affordable Care Act hardship exemption for catastrophic health coverage? 

Hardship refers to a situation that doesn’t allow a person to secure health insurance.  A hardship exemption is necessary for people age 30 and older to purchase catastrophic health plan coverage on the marketplace. 

Catastrophic health plans are a specific type of coverage available in the individual/family market. But a person who is 30 or older cannot purchase a catastrophic plan unless they qualify for a hardship exemption.

Who qualifies for the Affordable Care Act hardship exemption for catastrophic health coverage?

To qualify for a hardship exemption a person must provide evidence of a special circumstance that prevented the individual from purchasing or maintaining minimum essential health coverage (also referred to as “qualified major medical insurance”). To ensure the exemption is administered equitably for all applicants, the federal government established criteria for hardship exemption. 

How do you qualify for a hardship exemption?  

As explained on the federal healthcare marketplace, Healthcare. gov., if you are age 30 or older you may be eligible to purchase catastrophic health coverage if you meet one of the following criteria for hardship exemption:

• You are homeless.
• You are evicted or facing eviction or foreclosure.
• You got a shut-off notice from a utility company.
• You experienced domestic violence.
• You experienced the death of a family member.
• You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
• You filed for bankruptcy.
• You have medical expenses you couldn’t pay that resulted in substantial debt.
• You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
• You claim a child as a tax dependent who’s been denied coverage for Medicaid or the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child.
• You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
• As a result of an eligibility appeals decision, you’re eligible for enrollment in a health plan through the .Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a qualified health plan through the Marketplace.
• You have another legitimate hardship that prevents you from obtaining or maintaining coverage from a qualified health plan. 

Note: Loss of employment is not a qualifying event for hardship exemption.

You must apply for an exemption.  To do so you follow the instructions and use the government approved form. These documents may be downloaded from the website, Healthcare.gov, here. If granted, you will receive an Exemption Certificate Number (ECN) to enroll in the “Catastrophic” health plan.

How long does the hardship exemption last?

Hardship exemptions typically cover the month before the hardship, the months of the hardship, and the month after the hardship. However, they may be granted for a full calendar year under certain circumstances. For example, people ineligible for Medicaid only because a state hasn’t expanded Medicaid coverage may receive a full calendar year exemption. 

Affordability exemption: separate but related to hardship exemption

In addition to the specific hardships that are listed, above, an affordability exemption also exists, which individuals may use to purchase catastrophic health coverage.

As of 2022, you can qualify for this exemption if the lowest-priced coverage available to you through either a Marketplace or an employer-sponsored health plan would cost more than 8.09% of your household income. 

As in the case of the hardship exemption, you have to apply for the affordability exemption, You must follow the instructions and use the approved form the federal government publishes. Forms and instructions may be viewed and downloaded from the Healthcare.gov website here.  Affordability exemptions may last until the end of the calendar year.

Finding affordable insurance plans

If you don’t qualify for a hardship exemption and need affordable health coverage. eHealth can help you.  As a private exchange, eHealth can assist you with quality health insurance coverage both on and off the marketplace.  Visit our Individual & Family Health Insurance page. At eHealth, it’s fast and easy to find a variety of coverage options with a quick ZIP code search. This search will uncover a wide variety of affordable ACA and non-ACA medical plans.

Resources

Health coverage exemptions: Forms & how to apply. Healthcare.gov. Centers for Medicare & Medicaid Services. At https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/