No Health Insurance? You May Qualify for an ‘Obamacare’ Exemption

President Barack Obama’s health care law requires you to have health insurance or pay a tax penalty — but there are exceptions.

This could be music to your ears if you can’t afford a health plan or didn’t sign up for one before the open enrollment deadline on Jan. 31. You could be eligible for an exemption from “Obamacare’s” individual mandate, the part of the law that requires you to have health insurance.

Many small businesses are also exempt from the employer mandate, which requires companies to provide health insurance to employees. However, even if your company doesn’t provide health insurance, you aren’t automatically off the hook.

To avoid paying a penalty come tax season, understand the types of exemptions and whether you qualify for one.

Individual mandate exemptions

Qualifying for an exemption doesn’t necessarily mean you won’t have health coverage at all, but it may mean that you pay for health care differently than most Americans. For example, if you make about $16,390 per year individually (plus $5,740 for each additional family member), that’s 138% of the poverty line. With that income or less you may qualify for Medicaid, depending on your state.

Making too much money to qualify for Medicaid doesn’t mean you can easily afford health insurance. People who use the federal marketplace may qualify for tax subsidies to help pay premiums, but if your employer offers what’s considered minimal coverage, you won’t qualify for tax subsidies.

You also won’t qualify for those subsidies if you make more than 400% of the poverty level, even if that salary leaves you struggling with insurance costs.

“There are people who are put in the squeeze of having health insurance be unaffordable to them, even with the current system,” says Shana Charles, Ph.D, an Affordable Care Act expert and assistant professor of health sciences at California State University, Fullerton. As a result they remain uninsured, she says.

Here are the individual mandate exemptions:

• Your lack of insurance coverage was for three months or less.
• You aren’t required to file a tax return because your income is too low.
• You are incarcerated.
• You are in the U.S. illegally.
• You are part of a Native American tribe.
• The least expensive health insurance available to you costs to more than 8.13% of your 2016 income in premiums.
• You are a member of a health care sharing ministry.
• Your religion objects to insurance.
• You qualify for a hardship exemption.

The first five exemptions on the list will be automatically applied when you file your tax return for the year you went without insurance (if you’re required to file a return). Except for the hardship exemption, the others will take some legwork for you to apply and qualify. You can find out how to do that here, but you will need Adobe Reader software to download the application form; other PDF readers may not work.

Hardship exemptions

Hardship exemptions are different from others because they are often temporary and sometimes exempt you from the individual mandate for less than a year. That means that even if you don’t have to pay the full tax penalty for not having insurance this year, you might have to pay part of it, and you may not qualify again next year.

In most cases, you’re only exempt from having insurance during the time you were affected by the hardship. For example, if your utilities were shut off, you’re only exempt from having insurance for the months you were affected by the shut-off.

You may qualify for a hardship exemption if:

• You faced eviction or foreclosure in the past six months.
• You filed for bankruptcy in the past six months.
• You were homeless.
• A utility company sent you a shut-off notice.
• A flood, fire or other disaster caused significant property damage to your home.
• You are a recent victim of domestic violence.
• You were ineligible for Medicaid because your state didn’t expand Medicaid.
• Your health insurance was canceled for reasons other than nonpayment of premiums, and the plans offered in the marketplace are unaffordable.
• You had significant and unexpected increases in expenses while caring for an ill, disabled or elderly family member.
• A close family member recently died.
• Following an appeals decision, you are now eligible for lower-cost health insurance coverage, but went without it while appealing.
• Another person is required to provide medical support to your child, making you not responsible for the child’s penalty.
• You encountered “other hardships” in trying to get health coverage, determined case by case.

Unlike the first list of exemptions, these are often vague descriptions. The government handles these individually, so if you think you qualify you’ll have to apply. You can go here to find out how, and like the first list of exemptions, you’ll need Adobe Reader software to open the file.

Once you apply for any of these exemptions, it’s up to the marketplace administrators to determine whether you qualify, which can take some time. You’ll have better luck at a quick turnaround if you submit your application before open enrollment starts on Nov. 15. If you qualify, you’ll be mailed an exemption certificate number; if your application is denied, you can appeal that decision.

If you don’t have health coverage and won’t qualify for an exemption, we have one recommendation: Start saving up now for the tax penalty.

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: lacie@nerdwallet.com. Twitter: @LacieWrites.