8847 / When may a taxpayer be exempt from the rule that every taxpayer must obtain a certain level of health coverage or pay a penalty?

Beginning in 2014 (and ending after 2018), taxpayers were required to obtain a certain minimum level of health coverage or pay a penalty (known as the shared responsibility provision) for failure to obtain minimum essential coverage unless the individual was statutorily exempted from this requirement. In general, the following exemptions may have been applicable:

1. Religious Exemption. A taxpayer was exempt from the shared responsibility provision if the taxpayer (a) is a member of a recognized religious sect, the teachings of which render the taxpayer conscientiously opposed to accepting benefits provided by any public or private insurance provider that makes payments toward the expenses of obtaining medical care and (b) adheres to the established tenets or teaching of that sect.¹The religious sect must have been in existence on December 31, 1950 and must be recognized by the Social Security Administration as one that is conscientiously opposed to accepting insurance benefits, including Medicare and Social Security.


2. Foreign Persons Exemption. A taxpayer was exempt from the shared responsibility provision if he or she was not a citizen or national of the United States or an alien lawfully present in the United States.²


3. Exemption for Incarcerated Individuals. A taxpayer was exempt from the shared responsibility provision during any month incarcerated, other than incarceration while awaiting the disposition of the charges that are pending against the taxpayer.³


4. Affordability Exemption. If an individual’s required contribution for health coverage for the month exceeded 8 percent of the taxpayer’s household income for the year (see Q 8850), the taxpayer will not be subject to the shared responsibility provision.⁴


5. Exemption for Individuals not Required to File a Tax Return. Individuals who were not required to file a federal tax return for the year because their income did not exceed the applicable filing thresholds (see Q 8501) were not subject to the shared responsibility provision.⁵


6. Membership in an Indian Tribe. Members of recognized Indian tribes were not subject to the shared responsibility provision.⁶


7. Exemption for Short Coverage Gaps. An individual was not subject to the shared responsibility provision if there was a gap in health coverage for a period that was less than three months. However, if there was more than one such gap in coverage during the tax year, the exemption applied only to the first coverage gap.⁷


8. Hardship Exemption. The Secretary of Health and Human Services may allow exemptions from the shared responsibility provision on a case-by-case basis if it determined that an individual had suffered a hardship and was thereby unable to obtain the required coverage.⁸

In 2018, the Centers for Medicare and Medicaid Services (CMS) announced four new hardship exemptions that could exempt individuals from penalty for failure to purchase health insurance. The exemptions applied if: (1) the individual lives in an area with no available marketplace plans, (2) the individual lives in an area with only one insurer selling marketplace plans, (3) no affordable marketplace plan that does not cover abortion is available or (4) the individual experiences personal circumstances that make it difficult for them to buy a marketplace plan (including lack of access to required specialty care). Individuals claiming these new exemptions will be required to file a brief explanation of their circumstances when filing their application with the health insurance marketplace (individuals can apply for the 2016, 2017 and 2018 tax years).⁹

Both children and senior citizens were subject to the shared responsibility provision. If a child who could be claimed as a dependent did not qualify for an exemption, the taxpayer who could claim that child as a dependent was required to make the shared responsibility payment with respect to the child’s failure to obtain the requisite coverage.¹⁰ See Q 8848 for information on how to claim an applicable exemption.