Exceptions to the Individual Mandate


The Individual Mandate

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The ACA provides nine categories of individuals who are exempt from the penalty. An individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.

     • Individuals who cannot afford coverage

     • Taxpayers with income below the filing threshold

     • Members of federally recognized Indian tribes

     • Individuals who experience a hardship

     • Individuals who experience a short gap in coverage

     • Religious conscience objectors

     • Members of a health care sharing ministry

     • Incarcerated individuals

     • Individuals not lawfully present in the U.S.

* The religious conscience exemption and most categories of the hardship exemption are available exclusively through an Exchange. Individuals must apply for these exemptions by filing an application with the Exchange.

Four categories of exemptions will be available exclusively through the tax filing process for:

     • Individuals who are not lawfully present

     • Individuals with household income below the filing threshold

     • Individuals who cannot afford coverage

     • Individuals who experience a short coverage gap

Certain subcategories of the hardship exemption will be available exclusively through the tax filing process. The exemptions for members of a health care sharing ministry, individuals who are incarcerated and members of federally recognized Indian tribes can be provided either through an Exchange or through the tax filing process.

Individuals who are denied an exemption will have the right to appeal. In addition, an applicant that no longer qualifies for an exemption but is otherwise eligible to enroll in a QHP will be eligible for a special enrollment period.

The Affordable Care Act (ACA) requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This rule, which took effect in 2014, is often referred to as the “individual mandate.” Individuals may be eligible for an exemption from the penalty in certain circumstances.

On July 1, 2013, the Department of Health and Human Services (HHS) released a final rule on the individual mandate, which finalized provisions in a proposed rule issued on Feb. 1, 2013. Also, on Aug. 30, 2013, the Internal Revenue Service (IRS) issued a separate final rule on the individual mandate, finalizing provisions in their proposed rule issued on Feb. 1, 2013. These final rules generally adopt the proposed standards without significant change, including:

     • Exemptions from the individual mandate;

     • The method for calculating the penalty; and

     • Standards for designating certain coverage as constituting
        “minimum essential coverage.”

In conjunction with the final rules, HHS issued additional guidance specifically on the hardship exemption. The IRS issued Notice 2013-42 to provide transition relief for individuals who are eligible to enroll in employer-sponsored health plans with non-calendar year plan years, as well as related questions and answers for individuals.

Finally, on Jan. 27, 2014, the IRS published another set of proposed rules that supplement and clarify the earlier final rules, as well as Notice 2014-10 to provide transition relief from the individual mandate for months in 2014 in which individuals have certain limited-benefit health coverage that is not minimum essential coverage.


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