Obamacare Exemptions: Who Avoids the ACA Tax?
Are You Exempt from the Affordable Care Act?
Obamacare mandates that everyone get health insurance or pay a tax. But in 2015, there were 12.7 million people who were exempt. For example, anyone who doesn't make enough to pay income taxes is exempt. They can't pay the penalty because it IS a tax. No taxes, no penalty.
The law also realizes that people change jobs, move, etc. Therefore, you are exempt as long as you've had insurance for at least nine months out of the year. You also won't pay a penalty if you physically couldn't get insurance because, for example, you were in jail or weren’t in the United States.
Exemptions are also granted to members of Indian Tribes, health care sharing ministries, or religious sects that object to insurance.
There are nine hardship exemptions for those who can't afford insurance. You can apply for one if you:
- Can’t find insurance that costs less than 8 percent of your income
- Were homeless, evicted, or received a shut-off notice from a utility company.
- Were a victim of domestic violence, or another similar hardship.
- Earned 138 percent or less of the federal poverty level and your state didn’t expand Medicaid.
- Filed for bankruptcy in the last six months.
- Experienced damage from a fire or flood.
- Are in debt due to medical expenses or from caring for a sick family member.
- Were denied Medicaid or CHIP for your child, and someone else is supposed to pay for medical support and didn’t.
- Were eligible for subsidies, but the insurance company didn’t give them to you and so you were without insurance.
In 2013, many people found their insurance plans were canceled. That's because many companies chose not to comply with the ACA requirement that they cover services in all 10 essential benefits. If you're one of those whose plan was canceled, and you can't get an affordable plan on the health insurance exchanges, you can file for an exemption.
You will be eligible for a catastrophic plan. These have very low premiums, but the deductible is the same as the out-of-pocket maximum ($6,600 for individuals, and $12,300 for families). Anyone up to age 30 is already eligible for a catastrophic plan. Find out how to file for this hardship exemption here.
President Trump's tax plan effectively gives everyone an exemption beginning in 2019. It repeals the Obamacare tax.
It expands exemptions for 2018. You can get an exemption if you live in an area that has one or fewer health insurance options on the exchanges. You must show that the lack of choice prevents you from getting insurance. You can also claim an exemption if all insurance providers covers abortion, and that is against your beliefs. You are exempt if you need a specialist, and no plan covers that specialty.
The administration also directed the IRS to turn a blind eye if people don't prove they had health insurance for 2017 or 2018. It won't go after people who don't pay the penalty.
How to Get Health Care If You're Exempt
Even if you are exempt you may want to find insurance if you can. That's because you could get hit with the high cost of health care. A car accident or broken arm can cost anywhere from $2,500 to $25,000. Here's how to get Obamacare and when does it start?
If insurance or Medicaid are absolutely not an option, the Affordable Care Act still provides free health clinics. It provided $11 billion over five years to fund 8,500 community health centers. They are designed to serve the 22 million uninsured, Medicaid recipients, and 12 million immigrants in the United States illegally. It also funds the National Health Service Corps that brings primary care services to those not near health centers. Healthcare.gov has a site to help you find low-cost community health centers in your area
Obamacare benefits are paid for by an $18 billion cut in federal Medicare payments to hospitals. They agreed to it because it would save them that much by treating chronic conditions before it required expensive emergency room care. These Medicare payment cuts will remain as part of Trump's plan to repeal and replace Obamacare. But hospitals won't agree if preventive care is cut. That's exactly what will happen under Trump's plan. Insurance subsidies, Medicaid expansion, and funding for Planned Parenthood are on the chopping block.
Surprisingly, funding for other community health centers will be increased. (Source: "The Trump Effect on Your Obamacare Coverage," HealthInsurance.org, November 12, 2016.)
More on Obamacare
For more on Obamacare exemptions, see my book The Ultimate Obamacare Handbook (2015 - 2016).