The term hardship exemption referred to an exemption granted to individuals who couldn’t afford health insurance due to personal and/or financial circumstances. These exemptions were a significant part of a provision in the Patient Protection and Affordable Care Act (ACA), signed into law in 2010. The law required individuals to have acceptable health care coverage or face a fee. Those who couldn’t afford coverage could apply for an exemption where no penalty was assessed. However, the fee for uninsured individuals was eliminated in 2019 with the passing of the Tax Cuts and Jobs Act (TCJA).
Key Insights
- Supporting the Vulnerable: Hardship exemptions were granted under specific circumstances to individuals who couldn’t afford health care coverage.
- Penalty Relief: Those granted exemptions didn’t have to pay the individual mandate or Shared Responsibility Payment for not having health insurance during the hardship period.
- Varied Circumstances: Notable hardship circumstances included homelessness, eviction, domestic violence, or bankruptcy.
- Policy Change: Exemptions ceased to be necessary after 2019 as the individual mandate was eliminated.
How Hardship Exemptions Operated
The Affordable Care Act, signed into law by President Barack Obama on March 23, 2010, helped reduce health care costs for Americans by creating health care exchanges, expanding Medicaid eligibility, preventing insurance companies from denying coverage, and penalizing individuals who lacked coverage.
Starting in 2014, individuals were mandated to have health care coverage, called minimum essential coverage. Those who weren’t covered had to pay a fee known as the individual mandate or the Shared Responsibility Payment. This fee was a one-time charge collected by the Internal Revenue Service (IRS) through annual tax returns. Those unable to afford health care could apply for hardship exemptions through the Health Insurance Marketplace.
A hardship exemption was available between 2015 and 2018 under scenarios including:
- Homelessness
- Eviction in the last six months or facing foreclosure.
- Utility shut-off notice.
- Victim of domestic violence.
- Death of a close family member within the past three years.
- Fire, flood, or disaster causing substantial property damage.
- Bankruptcy filing within the last six months.
- Unpaid medical expenses in the last 24 months.
- Unexpected care expenses for an ill, disabled, or aging family member.
- Child coverage denied in Medicaid and CHIP, with another person court-ordered to provide medical support.
- Eligibility appeals decision for qualified health plans (QHP) or cost-sharing reductions.
- Ineligibility for Medicaid in states without ACA expansion.
Policy Evolution and Expansion
The Trump administration nullified the individual mandate in 2019, removing penalties for those without health insurance. The administration also expanded hardship exemption criteria, easing the approval process up to 2018 if individuals:
- Lived with no marketplace plans.
- Resided in areas with only one marketplace company.
- Couldn’t afford a plan without abortion coverage.
- Had personal circumstances impeding marketplace plan purchase, such as complications in finding specialty care plans.
Considering the elimination of the individual mandate in 2019, penalties for uninsured residents were negated. President Biden’s health care strategy includes reintroducing this individual mandate.
Important Considerations
Typically, hardship exemptions covered the month before, the month of, and the month following the hardship. The exemption period could extend up to one calendar year in certain conditions, such as when people were ineligible for Medicaid due to their state’s non-expansion of Medicaid coverage. Applicants were often required to provide supporting documentation for their exemption claims.
Related Terms: Affordable Care Act, Obamacare, Medicaid, Tax Cuts and Jobs Act, insurance.
References
- Govinfo.gov. “Remarks on Signing the Patient Protection and Affordable Care Act”.
- Health Insurance Marketplace. “Hardship Exemption Information”.
- Internal Revenue Service. “Individual Shared Responsibility Provision – Reporting and Calculating the Payment”.
- Healthcare.gov. “Hardship exemptions , forms & how to apply”.
- KHN. “4 New Ways You Can Avoid Fines For Not Having Health Insurance”.
- NBC News. “Meet the Press Blog: Latest news, analysis and data driving the political discussion”.
- Healthcare.gov. “Exemptions & catastrophic coverage”.
- Healthcare.gov. “After you apply for a health coverage exemption”.
