Hardship Exemption
The term hardship exemption referred to an exemption granted to individuals who weren't able to afford health insurance due to personal and/or financial circumstances. Commonly referred to as Obamacare, it helped reduce the cost of health care for the American public by creating health care exchanges, expanding the eligibility for Medicaid, preventing insurance companies from denying coverage, and penalizing individuals who weren't covered. The term hardship exemption referred to an exemption granted to individuals who weren't able to afford health insurance due to personal and/or financial circumstances. Lived somewhere with just one company selling plans on the marketplace Couldn’t find an affordable plan without abortion coverage. Had personal circumstances preventing them from purchasing a marketplace plan, including not being able to find a plan with specialty care. Individuals granted exemptions didn't have to pay the individual mandate or Shared Responsibility Payment for not having health insurance during the hardship period.
What Was the Hardship Exemption?
The term hardship exemption referred to an exemption granted to individuals who weren't able to afford health insurance due to personal and/or financial circumstances. These exemptions were part of a provision in the Patient Protection and Affordable Care Act (ACA), which was signed into law in 2010. Individuals were required to have acceptable health care coverage or else pay a fee. Individuals who weren't able to afford coverage could apply for an exemption where no penalty was assessed. The fee for uninsured individuals was eliminated in 2019 with the passing of the Tax Cuts and Jobs Act (TCJA).
How Hardship Exemptions Worked
Starting in 2014, most individuals were required to have acceptable health care coverage, which was known as minimum essential coverage. Those who weren't covered were charged a fee called an individual mandate or the Shared Responsibility Payment. This was a one-time fee collected by the Internal Revenue Service (IRS) when individuals filed their annual tax returns. Those who couldn't afford health care were able to apply for hardship exemptions through the Health Insurance Marketplace.
A hardship exemption may be granted for tax years between 2015 and 2018 for the following circumstances:
As noted above, the individual mandate was eliminated in 2019, which means individuals without health insurance are no longer penalized.
President Biden's health care plan includes bringing back the individual mandate.
Special Considerations
Related terms:
Affordable Care Act (ACA)
The Affordable Care Act (ACA) is the federal statute signed into law in 2010 as a part of the healthcare reform agenda of the Obama administration. read more
Bankruptcy
Bankruptcy is a legal proceeding for people or businesses that are unable to repay their outstanding debts. read more
Catastrophic Health Insurance
Catastrophic health insurance is medical coverage open to people under 30 and adults of any age who have a government-approved general hardship exemption. read more
Children’s Health Insurance Program (CHIP)
The Children’s Health Insurance Program (CHIP) is a government program that provides health insurance to children age 18 or younger. read more
Cost-Sharing Reductions (CSRs)
Cost-sharing reductions are a type of federal subsidy distributed as discounts that help reduce out-of-pocket costs for health care expenses. read more
Fee
A fee is a fixed price charged for a specific service and is paid in lieu of a salary. A fee can also be additional charges on a good or service. read more
Foreclosure
Foreclosure is the legal process by which a lender seizes and sells a home or property after a borrower is unable to fulfill their repayment obligation. read more
Form 1095-B: Health Coverage
For 1095-B is an IRS document sent to U.S. taxpayers who receive minimum essential coverage as defined by the Affordable Care Act. read more
ACA Health Insurance Marketplace
The Health Insurance Marketplace was established under Affordable Care Act and offers plans to individuals, families, and small businesses. read more
Health Insurance
Health insurance is a type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. read more