What is a Hardship Exemption?

A hardship exemption is an event that prevents an individual from obtaining health insurance. This approved exception prevents the person from paying a penalty for not having health insurance during the hardship period. 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 (individual shared responsibility payment). In certain cases, people can qualify for exemptions, including hardship exemptions, whereby no penalty is assessed9. As of 2019, the penalty for not having health insurance is eliminated; the exemptions below apply to the 2015-2018 tax years.

Key Takeaways

  • Hardship exemptions are circumstances that prevent an individual from securing health insurance.
  • The hardship exemption prevents the individual from being assessed a penalty for not having health insurance during the hardship period.
  • Beginning in 2019, the penalty, also known as the Shared Responsibility Payment, for not having health insurance no longer applies.
  • Some notable hardship exemptions are homelessness and being a victim of domestic violence.

Understanding Hardship Exemptions

Hardship exemptions typically covered the month prior to the hardship, the hardship period, and the month after the hardship. However, for some exceptions, the hardship exemption period could be extended up to a calendar year (e.g., people ineligible for Medicaid because their state has not expanded Medicaid coverage). A hardship exemption may be granted for these accepted circumstances:

  • Homelessness
  • 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 domestic violence.
  • Within the last 3 years, you experienced the death of a close family member.
  • You experienced a fire, flood, or another disaster (natural or man-made) that resulted in substantial damage to your property.
  • You filed for bankruptcy within the previous six months.
  • 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.
  • On your taxes, you expect to claim a child 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 are eligible for a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a 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.