IRS Issues Guidance on New Individual Mandate Hardship Exemption

Uninsured Health Coverage Tax Credit-Eligible Individuals Qualify for Exemption

The Affordable Care Act’s “individual mandate” provision requires every individual to have minimum essential health coverage for each month, qualify for an exemption, or make a penalty payment when filing his or her federal income tax return. Recently, the Internal Revenue Service (IRS) released guidance allowing certain individuals eligible for the Health Coverage Tax Credit (HCTC) to qualify for a new hardship exemption.

Background
The HCTC is a tax credit that pays 72.5% of qualified health insurance premiums for eligible individuals and their families. The HCTC expired at the end of 2013 but was reinstated in 2015, retroactive to 2014. However, the advance payments process that was expected to be in operation by July 2016 did not become operative at that time.  As a result, some eligible individuals who expected this assistance beginning in July 2016 may have been unable to make the premium payments and may have cancelled their health insurance coverage.

New Hardship Exemption
In accordance with prior CMS guidance, the IRS has determined that all individuals and their qualifying family members who were not enrolled in HCTC-qualifying health insurance coverage for one or more months between July and December 2016, but who would have been eligible for the HCTC if enrolled, will be entitled to claim a hardship exemption from the individual mandate on his or her 2016 federal income tax return for the months during that period that they were HCTC-eligible. This hardship exemption can be claimed without obtaining a hardship exemption certification from a Health Insurance Marketplace.

Click here to read the IRS guidance in its entirety.