DEFINITION of ‘Hardship Exemption’

Hardship Exemption is an approved excuse from paying a penalty fee for not having health insurance. A Hardship Exemption can be granted if an individual is in a situation that affects his or her ability to purchase health coverage. Hardship exemptions are a provision in the Patient Protection and Affordable Care Act (ACA), signed into law on March 23, 2010. Starting in 2014, most individuals were required to have an acceptable health-coverage level known as minimum essential coverage, or pay a fee (called the “individual shared responsibility payment”). In certain cases, people can qualify for exemptions, including hardship exemptions, whereby no penalty is assessed for having no insurance. As of 2019, the penalty for not having health insurance will be eliminated, so the exemptions below apply to the 2015-2018 tax years.

BREAKING DOWN ‘Hardship Exemption’

A hardship exemption may be granted for these accepted circumstances:

• You are homeless.
• You have been evicted in the last six months or are facing foreclosure.
• You received a shut-off notice from a utility company.
• You were the victim of recent domestic violence.
• You experienced the recent death of a close family member.
• You experienced a fire, flood or other disaster (either natural or human-caused) that resulted in substantial damage to your property.
• You filed for bankruptcy during the previous six-month period.
• You had medical expenses you were unable to pay in the last 24 months.
• You had unexpected increases in necessary expenses related to caring for an ill, disabled or aging family member.
• You expect to claim a child as a tax dependent who has been denied coverage in Medicaid and CHIP, and another person is under a court order to provide medical support for the child (in this case, you do not owe the penalty for the child).
• As a result of an eligibility appeals decision, you can enroll 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 were not enrolled in the QHP.
• You are ineligible for Medicaid because your state did not expand its eligibility under the ACA.

Four more exemptions have since been added under the Trump Administration. If you:

• Live in an area where there are no marketplace plans.
• Live in an area where there is just one insurer selling marketplace plans.
• Can’t find an affordable marketplace plan that doesn’t cover abortion.
• Experience “personal circumstances” that make it difficult for them to buy a marketplace plan, including not being able to find a plan in their area that gives them access to specialty care they need.

Eligible individuals can apply for a hardship exemption through the Health Insurance Marketplace.

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