The Affordable Care Act (Obamacare) included a “shared responsibility payment,” which in reality is a penalty for not having health insurance. Along with this penalty came a whole slew of exemptions from the penalty, including some that were designated as “hardship” exemptions. However, the hardship relief from the penalty required pre-approval from the government health insurance marketplace, which required the applicant to provide documentary evidence of the hardship. Once approved, the applicant was issued an exemption certificate number (ECN) that needed to be included on the individual’s tax return to avoid the penalty.
Hours after being sworn in, President Trump signed an executive order aimed at reversing the Affordable Care Act. The executive order states that the Trump administration will “seek prompt repeal” of the law. To minimize the “economic burden” of Obamacare, the order instructs the secretary of the Department of Health and Human Services and other agency heads to “waive, defer, grant exemptions from, or delay the implementation” of any part of the law that places a fiscal burden on the government, businesses or individuals.
As a result of President Trump’s executive order, the Centers for Medicare & Medicaid Services (CMS) announced on September 12, 2018, that consumers can claim a hardship exemption for not purchasing insurance and avoid the penalty for not being insured for 2018, either by:
- Obtaining an ECN through the existing application process or
- Simply entering the hardship code on their federal income tax return (a form of self-certification).
However, the CMS cautioned that consumers should keep any documentation that demonstrates qualification for the hardship exemption with their other tax records.
The following are the more common hardship exemptions affected by this change. For a complete list and additional details related to qualifying for these hardships, visit the CMS website.
- Being evicted or facing eviction or foreclosure
- Receiving a shut-off notice from a utility company
- Experiencing domestic violence
- Death of family member
- Fire, flood or other disaster that caused substantial damage
- Medical expenses that can’t be paid, resulting in substantial debt
- Increased medical expenses to care for a member of the family
- Claiming a child who has been denied Medicaid or CHIP coverage
- Ineligibility for coverage because the state didn’t expand Medicaid
The shared responsibility payment and exemptions are determined on a monthly basis, and a person is eligible for a hardship exemption for at least the month before, the month(s) during and the month after the specific event or circumstance that creates the hardship.
There are a variety of other exemptions in addition to the hardship exemptions, and 2018 is the final year the shared responsibility payment will be assessed. The Tax Cuts and Jobs Act (tax reform) has eliminated the penalty beginning in 2019.
If you have questions related to the penalty for not having health insurance and the exemptions from being penalized, please contact the experts at Henssler Financial: