Understanding the Hardship Exemption
The hardship exemption, a provision of the Patient Protection and Affordable Care Act (ACA), provided relief to individuals facing financial or personal challenges that made affording health insurance difficult. Enacted in 2010, the ACA mandated acceptable health care coverage, with penalties for non-compliance. However, individuals experiencing financial constraints could apply for this exemption to avoid penalties. In 2019, the Tax Cuts and Jobs Act (TCJA) eliminated the fee for uninsured individuals, rendering the hardship exemption null and void.
Key points to note:
- Certain individuals could qualify for hardship exemptions if they were unable to afford health insurance.
- Exempt individuals were spared from penalties like the individual mandate and Shared Responsibility Payment for lacking health insurance during their hardship period.
- Noteworthy circumstances that could warrant a hardship exemption included homelessness, eviction, domestic violence, or bankruptcy.
- After 2019, the hardship exemptions became obsolete following the removal of the individual mandate.
The Mechanics of Hardship Exemptions
The Affordable Care Act, commonly known as Obamacare, signed into law in 2010 by President Barack Obama, aimed to reduce healthcare costs through health care exchanges, Medicaid expansion, and penalties for uninsured individuals. Starting in 2014, individuals had to maintain minimum essential health care coverage to avoid penalties like the individual mandate or Shared Responsibility Payment enforced by the IRS during tax-filing.
Between 2015 and 2018, individuals facing various hardships could qualify for exemptions. These circumstances included homelessness, utility disconnection notices, domestic violence, recent bankruptcy, and other financial or medical crises.
In 2019, the individual mandate was discontinued by the Trump administration, expanding the conditions for hardship exemption approval. This revision aimed to make it easier for individuals facing specific obstacles to be excused from penalties, such as lack of marketplace plan access or unaffordable specialty care.
Following the removal of the individual mandate in 2019, individuals without health insurance ceased to face penalties, but recent discussions indicate a potential return of the mandate under President Biden’s healthcare plan.
Special Points to Note
Hardship exemptions typically encompassed the month prior to, during, and post the hardship, with possible extensions up to a full calendar year in certain scenarios. Documentation substantiating the hardship was often required, especially for cases involving Medicaid ineligibility due to state non-expansion.