Obamacare Exemption

Sep 23, 2014 by


ObamacarePresident Obama has said he embraces the term “Obamacare,” so I’m going to use it here. It’s quicker to type than Affordable Care Act, and every keystroke counts when you’re running a blog.

Obamacare legislation is complicated, and my guess is many Americans don’t know about or understand many of its features (and many believe it has features that it does not!). But one thing probably just about everyone knows by now is, under Obamacare, Americans must either:

1. Have qualified health insurance (aka minimum essential coverage), OR

2. Pay a penalty (“shared responsibility payment”) at tax time

 

Except there’s a #3: EXEMPTION from both (1) and (2)!

Who Is Exempt From Obamacare’s Insurance Requirement and Penalty Provision?

The IRS recently released one of its world famous publications on the topic of Obamacare exemptions. I’ve never seen a 1-page IRS publication, but this one is, likely setting a record. Check out IRS Publication 5172, “Health Coverage Exemptions” if you’re skeptical.

To quote from Publication 5172:

If you meet certain criteria, you will be exempt from the individual shared responsibility provision and will not have to obtain coverage or make a shared responsibility payment when you file your federal income tax return.


Just what are these magical criteria?

  • Members of certain religious sects
  • Short coverage gap
  • Certain noncitizens
  • Coverage is considered unaffordable
  • Household income below the filing threshold
  • Members of federally recognized Indian tribes
  • Members of Health Care Sharing Ministries
  • Incarceration
  • Hardships

Ms. Money Counselor and I are Americans living in Canada, so I’ve been assuming Obamacare doesn’t apply to us. I don’t see “Americans living in Canada” or elsewhere outside of the US on the list of criteria, so I’m hoping I’m not about to get screwed. We have all the health insurance we need!

Nervous, I went through the criteria to see if any others might apply:

  • Members of certain religious sects — I’m a member of the International Wizard of Oz Club. Might that count?
  • Short coverage gap — Not applicable.
  • Certain noncitizens — We’re US citizens, so no.
  • Coverage is considered unaffordable — This one might apply! We moved to Canada in part because we couldn’t afford our private US health insurance. I mean, who can except the wealthy?
  • Household income below the filing threshold — I hope not.
  • Members of federally recognized Indian tribes — I’d be in the US running a casino and feeling smug if this were true.
  • Members of Health Care Sharing Ministries — I hope not.
  • Incarceration — Not presently, but could change at any moment. Canada has a lot of pesky laws, you know.
  • Hardships — Well, it rains a lot where we live. Somehow I’m guessing that’s not going to cut it.

I don’t see that we clearly qualify for any exemption. Does that mean we may owe the “shared responsibility payment”? I wouldn’t be a bit surprised, given how Congress and the President gleefully kick around the millions of Americans living outside of the US.

Obamacare Exemption Details

Publication 5172 includes no details on these exemptions, but if you look hard you’ll find a handy link to an IRS webpage that provides details, in the impenetrable IRS style we’ve all come to know and loathe. For example:

When is coverage considered “unaffordable“? The IRS explanation:

The amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) is more than eight percent of your actual household income for the year as computed on your tax return.

Bronze level health plan? The amount I would have paid for employer-sponsored coverage? No offense, but paragraphs like this make me glad I live in Canada.

What’s a “short coverage gap“?

You went without coverage for less than three consecutive months during the year.

That one seems straightforward enough.

I’m particularly curious about which religious sects are exempt?

You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security.

I didn’t know any religious sects eschewed insurance benefits. See how educational the IRS website can be?

The IRS webpage linked above lists eight hardships. Rather than extend this already too long post, I’ll let you read those on your own by clicking this link if you’re interested along with details underlying all the exemptions listed above.

Are You Exempt from Obamacare?

Are you thinking you’re exempt from Obamacare’s insurance requirement and shared responsibility payment? Would you like to be? What’s your guess of the number of exempt Americans? Finally, would you guess membership in religious sects that conscientiously oppose accepting insurance benefits has ballooned lately?

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  • Travis Pizel

    The idea behind Obamacare (universal health care) is right, but the implementation sucks hard. I will never, ever refer to it as the “Affordable health care” program. Too many people would so disagree with the “Affordable” statement. Then you get a ton of people who point to how little they are paying for health care, being completely unaware that they are paying so little because others (like myself) are subsidizing their insurance.

    • I’m not smart enough to know, but I suspect the core reason it’s not affordable for some is that private, for-profit health insurance is still providing the service. In British Columbia (to give an example) the maximum premium today is $125.50 per month, but it’s indexed to income. The premium gradually drops as a function of income, and reaches $0 at some low income level. Of course part of our taxes are also paying for the health insurance and care system, so there’s a lot more to the picture than just the premium payment.

  • Well I’m not a US Citizen so I don’t know anything about exemptions… The part about religious sect is interesting, I’m also wondering what kind of religious sects won’t let their followers to pay for health insurance…?

    • Yes, that is intriguing. According to the IRS, the exemption is not about paying for health insurance but rather sects that are “conscientiously opposed to accepting any insurance benefits.” I’m interested enough to do a little research to see if I can identify any such sects.

  • Student Debt Survivor

    If health insurance was free, as it is in Canada, I would imagine there would be very few Americans who are, “conscientiously opposed to accepting any insurance benefits.” Now that working Americans can’t afford to buy coverage, I suspect all sort of people will be headed to church, or temple or wherever you go to “object” to health insurance. Sad!

    • I don’t know about other Canadian provinces, but in British Columbia we pay $125.50 per month for government provided health insurance for Ms. Money Counselor and I. However, the premium is indexed to income, such that at some low income level, health insurance and care would be free.

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