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Life Health > Health Insurance

5 great individual PPACA mandate exemption excuses

By Allison Bell

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It’s still hard to know when, and if, federal regulators will let Patient Protection and Affordable Care Act (PPACA) coverage mandate penalty provisions take effect.

If the Obama administration sticks with the PPACA interpretations it’s announced so far, many consumers who fail to own what the government classifies as minimum essential coverage (MEC) under Internal Revenue Code (IRC) Section 5000A will have to pay a “shared responsibility” penalty equal to 1 percent of their income for the year. 

The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) have developed a long list of reasons taxpayers can use to qualify for “hardship exemptions” from the mandate penalty. Avenues for qualifying for a hardship exemption include going to prison, following a religion that objects to insurance, and joining a recognized health care sharing ministry.

To use many of those reasons, a taxpayer must obtain hardship exemption certification from a PPACA health insurance exchange.

Now the IRS has come out with IRS Notice 2014-76, a document that lists deluxe hardship exemption justifications — justifications a taxpayer can use without bothering to get certification from the local exchange. 

Your individual health insurance clients may have a hard time using these justifications, but, if they can, they may be able to avoid some paperwork as well as the PPACA individual coverage mandate penalty.

To learn what those justifications are, read on. 

Unaffordability section of IRS notice

1. Family members of a worker who qualifies for affordable individual coverage, but not for affordable family coverage.

The IRS put this in because of a quirk in PPACA and the PPACA implementation regulations.

Regulators say an employer can fulfill its obligations under PPACA to offer affordable coverage with a minimum value by providing coverage set up in such a way that a full-time worker’s share of the self-only coverage premiums costs less than 9.5 percent of the worker’s W-2 wages from that employer.

The employer does not have to offer the worker access to affordable family coverage — and the family members of that worker do not qualify for PPACA public exchange premium subsidy tax credits.

But the family members will not have to pay the penalty to be imposed on people who fail to have MEC — and, apparently, they won’t have to go through an exchange certification process.

See also: The PPACA skinny plan war: 4 ways it could burn you

Gross income threshold section of IRS notice

2. A client earns too little income to have to file a federal income tax return.

Some workers don’t earn enough to have to file individual income tax returns. As long as those workers are heads of household, not dependents, they will be able to avoid the no-MEC penalty without going to the trouble of filing tax returns simply to report that they have little or no income.

See also: Witnesses: PPACA income verification is a mess

Timing section or IRS notice

3. The client ended up getting MEC but bought it a little late.

The IRS has created several sets of deluxe hardship exemption justifications for people who had public exchange problems in early 2014 — or look as if they might have had exchange problems — and eventually got MEC.

Indian section of IRS notice

4. The client has been eligible for health care services from an Indian health care provider.

Clients who want to avoid the no-MEC penalty may develop an intense new interest in their Native American genealogical heritage.

Medicaid expansion section of IRS notice

5. The client has a low income and lives in a state that did not expand access to Medicaid coverage.

Many states used PPACA Medicaid expansion money to make Medicaid available to all people with income below 138 of the federal poverty level, but many did not. Low-income adults in the non-expansion states can get out of the no-MEC penalty without bothering to apply for exchange certification. 

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