Individual mandate hardship exemption expanded


In December, the U.S. Department of Health and Human Services expanded hardships eligible for exemption from the Sec. 5000A shared-responsibility payment to include individuals whose policies were canceled by their previous insurers and who find that other coverage options are more expensive than their canceled policies.

The shared-responsibility payment, popularly known as the “individual mandate” of health care coverage under the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, also provides a wide range of other hardships and taxpayer groups and circumstances qualifying for exemption (see “Tax Practice Corner: Calculating the Health Care Individual Mandate Penalty,” Jan. 2014, page 54).

A taxpayer whose policy was canceled for any reason and who feels that procuring a different policy is unaffordable may now apply for a hardship exemption on the grounds that it is more expensive to buy a different plan. Such taxpayers are permitted to buy “catastrophic coverage” plans rather than PPACA-compliant health plans in 2014. A taxpayer who wishes to apply for this exemption must fill out a hardship exemption form and provide supporting documentation indicating that the previous policy was canceled. “Unaffordable,” in this case, does not refer to a health insurance policy whose premiums for self-only coverage exceed 8% of household income (a statutory exemption), but is measured with respect to the taxpayer’s canceled policy’s premium costs. The exemption may be granted by a health insurance exchange.

  Department of Health and Human Services, “Options Available for Consumers With Cancelled Policies” (Dec. 19, 2013), available at

By Dayna E. Roane, CPA/ABV, M.Tax., Perry & Roane PC, Niwot, Colo.


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