There are five additional exemptions to the individual mandate penalty that are recognized by the Affordable Care Act (ACA), and each has its own application form.
Let's focus on the most common exemption, the one that's granted to households who can't find an affordable health insurance plan. To qualify for this exemption, you need to prove that the cheapest health insurance policy available costs more than 8 percent of your household annual income [source: Healthcare.gov].
When the ACA became law, individual states had the option of using the federal online health insurance marketplace (Healthcare.gov) or creating their own state-run exchanges. As of late 2014, 14 states manage their own exchanges [source: Kaiser Family Foundation].
We bring this up because there are two separate exemption applications for households that can't find an affordable health insurance policy: one for states that use the federal marketplace and one for those that use their own exchanges. Consult the list of states on the exemption application instructions to figure out which application is right for you.
In either case, these applications are chiefly concerned with finding out how much income your household earns annually. You should be prepared to answer questions about your employer, other sources of income, and whether or not you or a family member receives health coverage through work or a government-sponsored program. If you live in a state with its own health insurance exchange, you will need to send additional documentation along with your application, either [source: Health Insurance Marketplace]:
- a copy of the eligibility notice from your state's exchange showing how many tax credits you are receiving, if any; or
- a printout of the screen from your online exchange showing the cheapest policy available in your area
Most of the other exemptions concern membership or affiliation with a religious or ethnic group. If you are a member of a recognized Native American or Alaskan tribe and are eligible for health care through the Indian Health Service (IHS), you are required to submit documentation of your membership (copies of tribal enrollment or membership documents, birth certificate of you or your family members, or a letter from IHS).
If you are a member of a religious sect that objects to insurance or medical care — some Amish and Christian Science practitioners, for example — you can apply for exemption from the individual mandate penalty without any additional documentation, just a statement of your membership in a recognized sect. The same is true for members of a health care sharing ministry.
Lastly, if you or any member of your household was incarcerated (in prison) for any portion of the tax year, you can apply for an exemption from the individual mandate penalty. The application asks for the time frame of the incarceration(s) and the names of the prison facilities.
For lots more information about tax exemptions and facts about the Affordable Care Act, check out the related HowStuffWorks links below.
Author's Note: Understanding the Health Care Exemption Form
The launch of Healthcare.gov back in 2013 was a technological fiasco. The government's servers collapsed under the weight of a flood of applicants. I was one of many health insurance shoppers waiting for weeks to access the site and look for plans. The 2014 open enrollment period launched a few days ago, and while the technological glitches are gone, there is still much that can be improved in the way that health insurance is sold in America. My chief complaint is with the abundance of confusing terminology: copayments vs. coinsurance, in-network vs. out-of-network. bronze vs. gold vs. platinum. I consider myself a moderately intelligent person, but the only thing I can reasonably understand are the premiums, which appear to be going up this year. How far of a drive is Canada?
- Health Insurance Marketplace. "Application for Exemption from the Shared Responsibility Payment for Individuals who are Unable to afford Coverage and are in Certain States with a State Based Marketplace" (Nov. 19, 2014) https://marketplace.cms.gov/applications-and-forms/affordability-sbm-exemption.pdf
- Healthcare.gov. "Exemptions from the fee for not having health insurance" (Nov. 19, 2014) https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/
- Healthcare.gov. "Hardship exemptions from the fee for not having health coverage" (Nov. 19, 2014) https://www.healthcare.gov/fees-exemptions/hardship-exemptions/
- Healthcare.gov. "How to apply for an exemption?" (Nov. 19, 2014) https://www.healthcare.gov/fees-exemptions/apply-for-exemption/
- IRS. "The Individual Shared Responsibility Provision" (Nov. 19, 2014) http://www.irs.gov/uac/Individual-Shared-Responsibility-Provision
- IRS. "Individual Shared Responsibility Provision – Calculating the Payment" (Nov. 19, 2014) http://www.irs.gov/uac/ACA-Individual-Shared-Responsibility-Provision-Calculating-the-Payment
- Kaiser Family Foundation. "State Health Insurance Marketplace Types, 2015" (Nov. 19, 2014) http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/