The Affordable Care Act, colloquially “Obamacare” signed into law by President Barack Obama on March 23, 2010, requires all individuals in the US, including children, to have either a compliant health insurance plan, or a qualifying exemption as of 2014. The health insurance coverage is easy to understand, but what about the exemptions? This article describes the exemptions commonly applied to individual tax filings.
Religious conscience exemption. This exemption is available for individuals who choose to be exempt from compliant health insurance because of religious conscience. To obtain this exemption your religious group membership must be in a registered qualifying church group. This is specifically an appropriate exemption filing in place with the Social Security Administration exempting your church. This is not a Form 4029, but the form required for your church to sign a Form 4029 on your behalf. If you are Form 4029 exempt, you qualify for this exemption.
To obtain a religious conscience exemption you would need to complete the religious conscience application with the Health and Human Services (HHS) and obtain your exemption certificate number (ECN). You then add your ECN with Form 8965 on your tax filing for the exemption from the minimum essential coverage penalty. The exemption is from the penalty only. You cannot elect out of the Affordable Care Act regulations; you can only elect out of the penalty.
Health Care Sharing Ministry exemption. Health care sharing ministries (HSCM) are qualifying pools where members share health expenses. If you are a member of healthcare sharing ministry, or choose to be a member of a healthcare sharing ministry, you can file for an ECN with your tax filing on the form 8965. Healthcare sharing ministries such as Samaritan Ministries have certain compliance requirements, but provide sharing coverage of health expenses for qualifying participants, similar to a church sharing program. Churches continuing to share health costs among members need to register as an HCSM.
Income below the tax filing threshold exemption. If you are below the tax filing threshold you can claim an exemption with your tax filing.
Coverage Is Considered Unaffordable exemption. If the minimum amount you would have paid for health insurance premiums is more than 8% of your household income, coverage is considered unaffordable. Example: with a minimum cost for compliant insurance of $2,400 per year, for example, if your income would be less than $30,000, you could file for an unaffordable coverage exemption with your tax filing.
Other qualifying exemptions include: i) Short coverage gap ii) members of Indian Tribes iii) Incarceration iv) Gap in CHIP coverage v) General hardship, etc.
Exemptions filing forms for an exemption certificate number (ECN) are an application requiring specific information about your family, personal information, and reasons for the exemptions. Hardship exemptions for instance require proof of hardship, i.e. proof of marginal income. Each exemptions application is filed with Health and Human Services government department and then shared with the IRS.
Summary: The Affordable Care Act that requires mandatory qualifying health insurance coverage for all individuals, has exemptions. Some of the most common are 1) Religious Conscience 2) Health Care Sharing Ministry 3) Income below the filing threshold 4) Unaffordable coverage, 5) General Hardship. If you need more information on exemptions that maybe available for your specific tax situation, contact a tax advisor or CPA, who specializes in providing specific answers to these questions.