Obamacare Exemptions: Who Avoided the ACA Tax?

How 12 Million People Got Exemptions from the Affordable Care Act

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Obamacare mandated that everyone get health insurance or pay a tax until 2019. As of that year, no one was required to enroll in health insurance. As a result, the Department of Health and Human Services no longer needed to offer national exemptions. The only one was for people older than 30 who wanted catastrophic coverages.

Exemption Facts

In 2015, there were 12.7 million people who were exempt. For example, anyone who didn’t make enough to pay income taxes was exempt. They couldn’t pay the penalty because it was a tax. No taxes, no penalty.

The law also realized that people change jobs, move, etc. So, you were exempt as long as you've had insurance for at least nine months out of the year. You also wouldn’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 were also granted to members of Indian Tribes, health care sharing ministries, or religious sects that object to insurance.

Hardship Exemptions

There were nine hardship exemptions for those who can't afford insurance. You could then apply for one if you:

  1. Couldn’t find insurance that cost less than 8% of your income
  2. Were homeless, evicted, or received a shut-off notice from a utility company.
  3. Were a victim of domestic violence or another similar hardship.
  4. Earned 138% or less of the federal poverty level and your state didn’t expand Medicaid.
  5. Filed for bankruptcy in the last six months.
  6. Experienced damage from a fire or flood.
  7. Were in debt due to medical expenses or from caring for a sick family member.
  8. Were denied Medicaid or Children’s Health Insurance Program for your child, and someone else was supposed to pay for medical support and didn’t.
  9. 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. Many companies chose not to comply with the Affordable Care Act requirement that they cover services in all 10 essential benefits. If you're one of those whose plan was canceled and you couldn’t get an affordable plan on the health insurance exchanges, you could have filed for an exemption.

You would have been eligible for a catastrophic plan. These had very low premiums, but the deductible was the same as the out-of-pocket maximum ($6,600 for individuals and $12,300 for families). Anyone up to age 30 was already eligible for a catastrophic plan. Find out how to file for this hardship exemption here.

Trump Exemptions

President Trump's tax plan effectively gave everyone an exemption beginning in 2019. It repealed the Obamacare tax. 

It expanded exemptions for 2018. You gave an exemption for those who lived in an area that had one or fewer health insurance options on the exchanges. You could also claim an exemption if all insurance providers covered abortion, and that was against your beliefs. You were exempt if you needed a specialist, and no plan covered that specialty.

The administration also directed the IRS to turn a blind eye if people didn't prove they had health insurance for 2017 or 2018. It didn't go after people who didn't pay the penalty.

How to Get Health Care Even Though You're Exempt 

Even if you are exempt, you may want to find insurance if you can. 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 did it start?

If insurance or Medicaid were 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 were designed to serve the 22 million uninsured, Medicaid recipients, and 12 million immigrants in the United States illegally.  It also funded 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 were 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 were 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 the author's book, "The Ultimate Obamacare Handbook."