Wednesday, December 4, 2013
Can You Get a Health Insurance Exemption?
aIf you don’t want to pay a penalty tax, you’ll either have to have health insurance after December 31, 2013, or you’ll have to get a health insurance exemption.One of the provisions of the Affordable Care Act, the individual mandate, penalizes people who go without health insurance by making them pay a penalty tax called a shared responsibility payment. There are only three ways around this penalty:Have health insurance coverage that meets coverage rules.Get an exemption.Belong to a group the government views as having health insurance coverage, whether or not you actually do have coverage.You’re likely exempt from the individual mandate health insurance penalty if you:Aren’t in the United States legally.Are in jail or prison, unless you're incarcerated pending disposition of charges.Are an Alaskan Native or a member of an Indian Tribe.Have a small enough income that you’re not required to file income taxesHow much income can you have before you’re required to file income taxes? For 2012, individuals could earn $9750 before they had to file, and couples could earn $19,500. But, it changes every year. If you’d like to know the filing threshold for any particular year, it’s found in IRS publication 501 for that year, which you can get from the IRS Forms & Publications webpage.Have a religious conscience objection to insuranceTo qualify for this exemption: You must be a member of a recognized religious sect.You have to waive all of your Social Security benefits.The Commissioner of Social Security must agree that your religion opposes insurance for things like death, disability, and medical care.The Commissioner must find that members of your religion have made arrangements to provide for their dependent members since they aren’t using insurance as a safety-net.The sect must have been in existence continuously since December 31, 1950.David Emery, the About.com Guide to urban legends, addresses this area in more detail in“Are Muslims Exempt from ObamaCare Health Insurance Mandate?”Are a member of a health care sharing ministryHealth care sharing ministries are religion-based groups of people who assist each other with paying medical bills. You can learn more about health care sharing ministries from The Alliance of Health Care Sharing Ministries. Your membership won’t make you exempt from the individual mandate unless your sharing ministry has been in existence since 12/31/1999. Additionally, the ministry's yearly accounting audits must be available to the public.Can’t afford coverageTo be considered unaffordable, your contributions toward job-based coverage must be more than eight percent of your household income. For health insurance from your state’s health insurance exchange to be considered unaffordable, your contribution toward the annual premium of the lowest cost bronze plan available in the individual market must be more than eight percent of your household income.Have gone less than 3 consecutive months without coverageYou’re only allowed to use this exemption once per year, and only the first occasion each year is exempted. For example, if you’re uninsured for two months in February and March, then again for three months in August, September, and October, you’ll only be exempt for the February and March period. You’ll owe the shared responsibility payment penalty for the August, September, and October period.Have a hardship that legitimately prevents you from getting health insuranceYour health insurance exchange must decide that you have a hardship affecting your ability to get health insurance. Exchanges use rules and guidelines to make this decision. You can learn more in, "How To Get a Hardship Exemption."Your state health insurance exchange is responsible for exemptions based on hardship and religious conscience objection. Apply with the exchange; it will make the eligibility decision and issue the exemption if you qualify.You can claim exemptions based on the following when you file your federal tax return:coverage costing more than eight percent of your incomemembership in a healthcare sharing ministrymembership in an Indian Tribebeing incarceratedIf you prefer not to wait until you file your taxes, the exchange can also address the above exemptions. You might choose this option if you have questions or if you're not sure if your situation matches the criteria exactly.Exemptions due to being uninsured for less than three months will be taken care of when you file your income taxes.If your exemption is due to having a small enough income that you don't have to file federal income taxes, you don't actually have to apply for the exemption; it's automatic. If you file taxes even though you don't have to, for example because you want to get a refund, you won't have to pay the penalty tax.The government treats some people as though they have minimal essential health insurance coverage, even if they don’t. While not exactly the same as being exempt, the effect is similar in that those people don’t have to pay the health insurance penalty tax, even if they don’t have health insurance. You’ll be treated as though you have health insurance coverage if:For at least 330 days of the year, you live outside of the United States and maintain a tax home outside of the United StatesYou are a resident of Guam, American Samoa, Northern Mariana Islands, Puerto Rico, or the US Virgin Islands, and you don’t have a closer connection to the United States or a foreign country than you do to the US possession where you’re claiming residency.If none of those things applies to you, but you don’t want to owe the penalty tax, your best bet for avoiding it is to get health insurance coverage.If you’re unemployed or can’t get health insurance through your employer, your next best option is to try your state’s health insurance exchange. All of the health insurance plans sold through the exchange will meet the rules for minimum coverage. The exchange will also check to see if you’re eligible for any subsidies or tax credits to help you afford coverage, and apply those credits before you have to pay for the insurance.Before you shop for health insurance at your state’s health insurance exchange, learn how to pick the health insurance plan that’s the best fit for your healthcare needs and your budget in, “Before You Buy Health Insurance—What You Need to Know When You’re Shopping for Health Insurance.”If you don’t qualify for a health insurance exemption, you’re not living abroad or in a U.S. possession, and you’re not going to get health insurance before January 1, 2014, then you’re probably going to have to pay the shared responsibility penalty. “How Much Is the Health Insurance Penalty for an Individual?” and "How Much Is the Health Insurance Penalty for Families?" will help you figure out how much you’ll owe. Source: U.S. Code 2011, Title 26, Subtitle D, Chapter 48, section 5000A