Minimum essential coverage is defined as follows:

  • Employer-sponsored coverage (including COBRA coverage and retiree coverage)
  • Coverage purchased in the Individual Market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
  • Medicare Part A coverage and Medicare Advantage plans
  • Most Medicaid coverage
  • Children’s Health Insurance Program (CHIP) coverage
  • Certain types of veterans health coverage administered by the Veterans Administration
  • TRICARE
  • Coverage provided to Peace Corps volunteers
  • Coverage under the Non-appropriated Fund Health Benefit Program
  • Refugee Medical Assistance supported by the Administration for Children and Families
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
  • State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)

The following types of health insurance are not minimum essential coverage:

  • Short Term Health Plans
  • Fixed Benefit Health Plans
  • Supplemental Medicare like Part D and Medigap
  • Some Medicaid covering only certain benefits
  • Vision only, Dental only, and limited benefit plans
  • Grandfathered Plans (You will avoid the fee, but won’t get the new rights and protections)

There are some new forms pursuant to the provisions of the Affordable Care Act (ACA) that will become familiar to most taxpayers beginning with 2014.  I have included a discussion about these new forms later in this webpage.

Exemption from the mandate to have health insurance

The easiest way to qualify for an exemption is to go to HealthCare.Gov and sign up for a marketplace account. When you sign up, you automatically find out if you qualify for some exemptions and might even find you qualify for lower costs on coverage. You can qualify to shop for a catastrophic plan with lower premiums if you obtain a Hardship Exemption.

If you plan on applying for an exemption, don’t leave it to the last minute. In most cases, you’ll have to fill out a form and wait for confirmation before you can report the exemption. In addition, many exemptions require certain documentation to verify you qualify. Obtaining that documentation also takes time. Waiting can mean a delay of your Federal Tax Refund.

Most exemptions will require documentation. If you cannot provide documentation, you may still qualify for certain exemptions, like for being homeless. That safest way to avoid the fee is to simply obtain health insurance. Some exemption will buy you more time to sign up and these tend to be the ones with more flexible requirements of proof.  Other exemptions simply allow you to not pay the tax and these will tend to require proof.

Unless you have an exemption certificate (assuming you do NOT have health insurance), you should expect to have to pay the penalty with your return. 

If any of the following circumstances apply to you, you may qualify for a “hardship” exemption from the penalty:

  1. You were homeless
  2. You were evicted in the past 6 months or were facing eviction or foreclosure
  3. You received a shut-off notice from a utility company
  4. You recently experienced domestic violence
  5. You recently experienced the death of a close family member
  6. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
  7. You filed for bankruptcy in the last 6 months
  8. You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
  9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
  10. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child.
  11. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace
  12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act
  13. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
  14. You experienced another hardship in obtaining health insurance

Applying for a hardship exemption

To apply for a hardship exemption, use this exemption form: Individuals who experience hardships (PDF). See instructions to help you fill out an exemption application (PDF).

How long a hardship exemption lasts

Hardship exemptions are usually provided for the month before the hardship, the months of the hardship, and the month after the hardship. However, the Marketplace may provide the exemption for additional months after the hardship, including up to a full calendar year.

  • For a hardship exemption based on affordability, the exemption will be granted for the remaining months in the coverage year.
  • For people ineligible for Medicaid only because a state hasn’t expanded Medicaid coverage, the hardship exemption will be granted for the whole calendar year.
  • For people eligible for Indian Health Services, the hardship exemption will be granted on a continuing basis. It may be kept for future years without having to submit another application. This is true as long as there are no changes to your membership in a tribe or eligibility for services from an Indian health care provider.