Who is exempt from the health insurance mandate under Obamacare?

2013

Who is exempt from the health insurance mandate under Obamacare?

That sounds like a simple question, but the regulations to implement the law are complex and determinations involve both the various state exchanges and the Internal Revenue Service.

The Internal Revenue Code provides nine exemptions from the individual mandate:

These five are determined by the exchanges:

Hardship or domestic circumstances
Religious conscience
Membership in a health care ministry
Incarceration
Member of an Indian tribe

Determined by the IRS:

Not being lawfully present in the U.S.
Short coverage gaps
Household income below the filing threshold
Inability to afford coverage

In some cases individuals must apply for exemption annually. Approved exemptions are sent to the IRS. It is possible to be exempt for only part of a year.

To give you a flavor for the complexity of all this just take a look at the process for determining the exception to the coverage mandate for affordability:

“The required contribution for a spouse and dependents is the employee’s premium for the lowest-cost coverage, covering the employee as well as the spouse and dependents, available. For example, if the required contribution for self-only coverage is less than 8% of household income, but family coverage under the same plan is more than 8% of household income, the spouse and dependents — but not the employee — would be exempt.” (Prepared by Towers Watson)

Now if you think that is clear, consider that an employee who is required to pay more than 9.5% of his household income for single employer-provided coverage is eligible to enroll in a health insurance exchange. Oh wait, it may not be 9.5% of household income because employers don’t know household income so they have the option instead of using the employees W-2 reported earnings. See more about this here.

What we have then is a benchmark using 8% of household income to determine if you are exempt from the mandate to have health insurance, but at the same time if you are eligible for employer coverage, you cannot enroll in a health insurance exchange unless you are required to pay more than 9.5% of your income (as may be defined).

So exactly what is “affordable” health insurance? I’m still waiting for a single definition and I suspect I have a long wait.

Now you have a small sample of what your employer, insurance company and those setting up the exchanges are going through.

Confused yet?

Oh, by the way; would you like to know if you have a “hardship” that exempts you from the coverage mandate?

It’s perfectly clear of course.

HARDSHIP EXEMPTION

The PPACA authorizes HHS to exempt people for whom obtaining coverage is a hardship. The proposed regulation describes circumstances that constitute a hardship for this purpose:

Financial or domestic circumstances, including unexpected natural or human-caused events, that create a significant, unexpected increase in essential expenses, such that buying health insurance would have deprived the individual of food, shelter, clothing or other necessities.

Individuals that an exchange determines, based on projected household income, will not be offered affordable coverage (even if, due to a change in circumstance, it turns out that the coverage would have been affordable)

Certain individuals who were not required to file an income tax return but who nevertheless filed to receive a tax benefit, who claimed a dependent who was required to file a tax return and whose household income exceeded the applicable return filing threshold.

Individuals who would be eligible for Medicaid had the state chosen to expand Medicaid eligibility

The hardship exemption also will be available on a case-by-case basis for people whose unexpected personal or financial circumstances prevented them from obtaining coverage. (Prepared by Towers Watson)

By the time we get finished with all this six more Americans will obtain health insurance under the Affordable Care Act.