Don't Want to Buy Health Insurance? Look Into Market Place Hardship Exemptions

If you can afford health insurance but you don't wish to buy it expect a higher federal income tax bill for 2015. Under the Affordable Care Act, unless you have a health coverage exemption, the IRS will assess an additional penalty, using the higher result of the following two criteria:

  • 2% of your yearly earnings: The amount of income above about $10,150, the tax-filing threshold, is what you use to calculate the penalty. The amount is capped according to what the IRS figures is the "average bronze plan premium."
  • $325 per person for 2015--$162.50 per child under age 18: The maximum family penalty per family using this method is $975.

health tax exemptions

What qualifies as health coverage--and what does not

Most health plans, including any Marketplace plan, or individual insurance plan you already have qualifies as coverage. Any job-based or retirement plans, Medicare Parts A or C, and TRICARE plans for military retirees also qualify.

Not all plans offered outside the Marketplace will qualify for minimum essential coverage, though.

Plans that would not qualify include:

  • health plans that cover a fixed, limited term
  • health plans that have fixed benefit restrictions
  • Medicare supplemental plans only, like Part D and Medigap
  • certain Medicaid schemes covering only specific benefits
  • limited-benefit plans, e.g., vision only, dental only

Exemptions and how to get them

For tax year 2015, you can apply for an exemption to avoid paying the tax penalty. The exemptions are income, health, and group membership related. They also cover anyone serving a prison sentence, U.S. citizens living abroad, and certain non-citizens.


You could qualify for an income-related exemption if:

  • the least expensive health coverage available (Marketplace or job-based) would amount to more than 8.05 percent of your household income
  • you do not earn enough to be required to file an income tax return

Health coverage related

These apply when:

    • your lack of health insurance coverage was for no more than two consecutive months
    • your home state failed to expand its Medicaid program to meet the requirements of the Affordable Care Act, but if it had, you would have qualified

Group membership related

Certain groups are exempted:

    • members of a federally recognized Native American tribes
    • members of a recognized health care sharing ministry
    • religious sects that object to health insurance, Medicare and Social Security

Hardship exemptions

Some life situations can prevent you from getting health insurance. Examples of hardships that qualify include homelessness, eviction or foreclosure, domestic violence, natural disaster, family tragedy, etc.

To qualify for a hardship exemption, you must complete a paper application and mail it to the Marketplace. For a list of qualifying hardships and instructions on how to apply, go to the webpage.

Loss of previous coverage

Likewise, if your insurance company canceled your plan, and you believe other Marketplace plans are unaffordable, you can apply for an exemption. The above-mentioned 8.05 percent of the household income criteria applies.

You can apply for this exemption either on your 2015 income tax return or completing a separate Marketplace exemption application. Download the application forms and instructions from the website.

Need some help?

Your health coverage now affects your 2015 federal income tax return. The fees for not having health insurance could be another unexpected financial hit. Need some help or advice on addressing tax implications on yourself, your family or your employees? Dukhon Tax and Accounting has the expertise and experience to help you through tax year 2015 and beyond with the plans and strategies you need for the best tax planning.

Incorrect Tax Forms Cause Major Headaches for 800,000 Americans

One of the biggest changes facing tax filers this year is proving that they have health care coverage due to the requirements of the Affordable Care Act (AFA). Additionally, filers must also prove that their income qualifies them for subsidy payments, which they have already been receiving. Unfortunately, some serious errors by government officials have just made this process even harder. Over 800,000 filers in 37 states, who thought they were prepared to file, have been notified that the government sent them incorrect paperwork. Even worse, at least 50,000 people who have already filed their taxes using the wrong documentation will have to file amend returns once they receive the corrected form.

The Problem

1095 form errorThe error only affects individuals and families who obtained health care coverage through the federal exchange and received subsidies. Subsidies are granted by the government to help individuals under certain income limits pay for their health insurance premiums. The 2014 subsidies were based on the projected household income at the time of enrollment. The government recent mailed out 1095-A forms, which report the average benchmark premium in an individual’s area and the amount of subsidy that they qualified for. The premium amount is how the government determines the amount of premium tax credit filers are eligible to receive. A blog post on the website stated that the initial 1095-A forms contained 2015 premium benchmarks instead of the ones for 2014. Speaking on behalf of the Centers for Medicare and Medicaid Services, Andrew M. Slavitt said that they do not know how or why the mistake occurred. Officials estimate that individuals will receive a corrected Form 1095-A in the first week of March.

Unfortunately, it wasn’t just the federal health care exchange that had reporting issues. James F. Scullary, a spokesman for the California healthcare exchange, said that they were in the process of sending out over 100,000 corrected forms to households in that state.

The Impact

Affected households were notified via email and phone calls as soon as the error was detected. Filers can also login in to their accounts, where they will see a message indicating whether they were affected. Additionally, they can call the federal customer service center at 800-318-2596. The 50,000 tax filers who have already filed their income tax returns will receive special instructions from the Treasury Department as to how they can file amended returns.

These errors are particularly difficult for lower-income families who received subsidies for their heath care premiums. Many of these families rely on their annual tax refunds to pay critical household bills. Waiting to file taxes until a new form is mailed out places them in a tough financial position.

Healthcare Enrollment Extended

In related news, millions of households who are still uninsured are also getting surprises when they file their taxes. Steep penalties are subtracted from a household’s tax refund if they cannot prove that they had health insurance coverage for 2014. The penalty is $95 per adult or 1 percent of income. In 2015, the fees rise to $325 per adult or 2 percent of income. To help mitigate these penalties, President Obama announced a special enrollment period for healthcare that runs from March 15th to April 30th. This allows uninsured individuals to sign up for healthcare on and not have to pay penalties for 2015. These individuals are still responsible for paying the penalties for not having insurance during the 2014 year. Only taxpayers who live in states with a Federally-facilitated Marketplace (FFM) are eligible to take advantage of this special enrollment period.