Today, I achieved my 3,000th mile of the year and am rounding the corner on 2015. Year end is a time to clean out the closets and make financial decisions, which includes your medical insurance review. This article clarifies the individual insurance mandate tax assessment under the Affordable Care Act and the exemptions to avoid taxation.
The Patient Protection and Affordable Care Act was passed by Congress in 2010, creating a standard for medical insurance for most residents of the U.S. and requiring all to obtain medical insurance. As of 2015, individuals who lack proof of medical insurance, will have to pay an additional tax. The tax penalty is up to $695 for those individual tax payers lacking insurance and up to 2.5% of adjusted gross income, capped at $2,085 for a family ($347.50 per child).FYI, your insurance company will produce a form which shows the number of months you had medical insurance coverage. If you obtained your medical insurance through an insurance exchange, the form will also show the tax credits which were advanced from the government to pay for the premiums, which will affect your overall tax filing. In other words, your tax credits reduce the amount of a refund you may receive or conversely, may require you to pay some money back to the government if too much money was advanced to cover your insurance premiums.
Exemptions to the Individual Insurance Mandate
Like any other law which Congress creates, there are exemptions and here is a summary of the exceptions to the individual insurance mandate under the Affordable Care Act.
The hardship waiver is based on four main standards; your residency status, your financial situation, the cost of insurance relative to your income, and religious exemptions. Here are the eligible exemption criteria as drawn from the healthcare.gov web site. 
Cost of the Medical Insurance is Unaffordable
8% Rule for Insurance Exchange Plans
If the lowest price insurance available to you would cost more than 8% of your household income (generally based on the adjusted gross income figure on your income tax return) no penalty will be assessed for lack of medical insurance. If the individual medical insurance policy was cancelled and you have found marketplace plans to be unaffordable you will also notbe penalized for lack of medical insurance.
Residents whose Annual Earned Income is below $6,300 are not required to file a tax return. In this case it would be difficult for the government to audit compliance with the medical insurance mandate, but these individuals are probably covered on Medicaid or Medicare anyway.
Family Hardship Situations
Of small comfort, homeless residents will not be taxed for lack of medical insurance, but this begs the question, do homeless people file income tax returns? Nor will those facing eviction or who have been evicted from their home be penalized for lack of health insurance. Receiving a utility shut off notice also creates an exempt classification, which leaves the door open for gaming of the system. Bankruptcy filed within the last six months is an exempt category. Losses due to a natural disaster such as flood, fire, or other disaster also mitigate the need to obtain medical insurance. Unexpected medical expenses for the care of a disabled, elderly, or ill family member are also an exempt class. Those supporting a child for whom another person has been court ordered to provide medical support, are eligible for an exemption from the tax penalty. The recent death of a family member also creates a tax penalty waiver for lack of medical insurance. Domestic violence events also create an exemption and to these victims, please note free health care is available at trauma centers.
Hardship in obtaining health insurance, such as having your policy cancelled creates an exemption to the A.C.A. insurance mandate tax. No penalty will be assessed for any eligible individual if the period of without insurance was for less than three months of the year.
Members of a health care sharing ministry, which are 501-C 3 plans, are exempt from compliance with the medical insurance mandate under the Affordable Care Act. Additionally, those who are members of a recognized religious sect which objects to insurance, including Social Security and Medicare are exempt.
Unlawful immigrants are precluded from insurance exchange participation and enrollment in other federal health programs. Sadly, this provision includes pregnant women and children. Incarceration gives you an exemption, because you are a ward of the state. Finally, if you reside in a state which did not expand its Medicare program to meet the 138% of the federal poverty level for enrollment under the Affordable Care Act and you are in that income category, you are exempt from the tax penalty if you are unable to squeeze the insurance premiums from your tight budget.
Teeth gnashing aside, as observed there are enough loopholes in the individual insurance mandate to drive a truck through. For more information on the religious exemption, please follow the link to the article I published on it in 2014. To calculate your tax penalty, use a free online tax preparation program and make your life easier. Also, the government site, healthcare.gov has a great interactive worksheet to figure out if you may owe an insurance tax. And this is the healthpolicymaven wishing you a happy and safe holiday season for Chanukah, Christmas, Solstice Festival, or whatever your end-of-year ritual may be.
Feel free to share this article voraciously, with appropriate attribution of course. This article was written by Roberta E. Winter, a freelance writer and healthcare analyst and author of Unraveling U.S. Healthcare-A Personal Guide. http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972
Sources for more information