Summary
The hardship exemption was a limited exemption from the Affordable Care Act’s (ACA) individual mandate penalty (the “shared responsibility payment”) for people who could not obtain or afford minimum essential health coverage because of specific personal or financial circumstances. It let eligible people avoid the federal tax penalty that applied to most uninsured Americans for tax years when the federal mandate was enforced (primarily 2014–2018). The federal penalty was eliminated beginning in 2019 by the Tax Cuts and Jobs Act (TCJA), but similar rules can still matter for state-level mandates.
Key takeaways
– The hardship exemption excused people from the ACA individual mandate penalty if they faced qualifying hardships that made enrollment impossible or unaffordable. [1][4]
– The federal individual mandate (and federal penalty) was enforced for tax years starting in 2014 through 2018; the federal penalty was effectively eliminated starting in 2019. [3]
– Hardship exemptions were applied for through the Health Insurance Marketplace (Healthcare.gov or state marketplace). Approved applicants received an Exemption Certificate Number (ECN) to use when filing taxes. [4]
– Even though the federal penalty no longer applies, many states have their own individual coverage requirements and exemption rules; check your state’s marketplace and tax agency. [6]
How hardship exemptions worked
1. Who could request one
– People who could not afford coverage or could not enroll because of specific events or circumstances. Common hardship categories included (examples): homelessness; eviction or foreclosure; domestic violence; death of a close family member; a fire or natural disaster; sudden and unexpected increase in medical expenses; bankruptcy; and situations related to immigration or loss of eligibility for Medicaid because a state had not expanded it. [2][4][7]
2. What the exemption covered
– Exemptions generally covered the month before, the month of, and the month after the hardship event. In some circumstances (for example, inability to get Medicaid because a state did not expand eligibility), the exemption period could be extended to cover a longer time, sometimes up to a full calendar year. [4]
3. How to apply (when the federal penalty applied)
– Apply online at HealthCare.gov or your state’s Health Insurance Marketplace, or by calling the Marketplace call center. [4]
– Choose the hardship exemption category that best matches your situation and provide the requested information. Some categories allowed you to attest to circumstances; others required documentation. [4]
– If approved you received an Exemption Certificate Number (ECN). You entered the ECN on your federal tax return (Form 8965 was used for reporting exemptions during the years the penalty was in effect) to avoid the individual mandate penalty for the months covered. [3][4]
Important — changes and timelines
– Federal enforcement: The ACA’s federal individual mandate penalty was in effect for tax years 2014 through 2018. The Tax Cuts and Jobs Act zeroed out the penalty starting in 2019; as a result, there is no longer a federal penalty for being uninsured for 2019 and later tax years. [3]
– Administration changes: The rules and available hardship categories were altered and in some cases expanded in the years before the federal penalty went away, which made it easier for some people to qualify for exemptions up through 2018. [5][6]
– State mandates: Several states (and the District of Columbia) have their own individual mandates and their own exemption procedures. If you live in one of those places, you may still need to obtain an exemption to avoid a state penalty. Check your state marketplace or tax authority. [6]
Special considerations
– Documentation: Some hardship categories require proof (eviction notices, hospital bills, police reports, bankruptcy filings, etc.). Keep copies of everything submitted and of the ECN if you receive one. [4]
– Short coverage gaps and timing: Many hardship exemptions were designed to cover a short, specific period (typically spanning the month of the event and adjacent months). Understand the dates the exemption covers and how that maps to your tax year. [4]
– Retroactive situations: If you retroactively discover you were eligible for an exemption for past months/years when the federal penalty applied, you could apply for an exemption for those months through the Marketplace and, if approved, use the ECN when filing amended tax returns for those years (procedures vary and professional tax advice is recommended). [3][4]
– State-specific differences: States with their own mandates may accept Marketplace-issued federal hardship exemptions or may require a state-specific exemption application—verify local rules. [6]
Practical step-by-step guide
If you needed a hardship exemption for the period when the federal penalty applied (or if you want to check whether a state penalty and exemption apply now), follow these steps
1. Identify whether a penalty applies to you
– Federal: no penalty for 2019 onward; penalty applied for most people 2014–2018. [3]
– State: check if your state currently has an individual mandate (e.g., California, Massachusetts, New Jersey, Rhode Island, Vermont, D.C., and others have/started mandates at different times). [6]
2. Determine if your situation fits a hardship category
– Review the Marketplace’s list of hardship categories and examples (homelessness, domestic violence, natural disaster, eviction, denial of Medicaid due to non-expansion, etc.). [4]
3. Gather documentation
– Collect any required supporting documents: eviction or foreclosure notices, medical bills, police reports, death certificates, bankruptcy filings, employer or immigration documents, or other proof tied to the hardship category. [4]
4. Apply for the exemption
– Online: sign in or create an account at HealthCare.gov or your state marketplace and select “Apply for a health coverage exemption.” Upload documents if required. [4]
– Phone/in person: call the Marketplace call center or visit a local enrollment assister/navigator if you need help. [4]
5. Receive and record the Exemption Certificate Number (ECN)
– If approved, you’ll get an ECN. Keep a record of it and any approval notice; you’ll use it when filing taxes. [4]
6. Use the exemption when filing taxes (for years when the federal penalty applied)
– Enter the ECN on the appropriate tax form (Form 8965 for the federal shared responsibility reporting during the years the penalty applied) or follow IRS instructions for reporting exemptions. If claiming a past exemption, consider whether you need to amend a prior tax return. Consult a tax professional if uncertain. [3][4]
7. If you live in a state with a mandate
– Check state-specific procedures—some states accept the Marketplace ECN, others have separate application processes and forms. Contact your state marketplace or tax agency for exact steps. [6]
Where to get help and authoritative sources
– HealthCare.gov (Marketplace information and exemption applications) — Healthcare.gov: Hardship exemptions, forms & how to apply. [4]
– Marketplace/exchange assistance — your state’s health insurance marketplace or local navigator/assister program. [4]
– Internal Revenue Service — guidance on the individual shared responsibility provision and tax reporting (historic guidance for 2014–2018). [3]
– Historical and policy context — Investopedia summary; news analyses on changes and expansions to exemption rules. [2][5][6]
– Original ACA signing remarks — govinfo.gov (text of Presidential remarks when the ACA was signed into law). [1]
Selected sources
1) GovInfo.gov. Remarks on Signing the Patient Protection and Affordable Care Act.
2) Investopedia. Hardship Exemption (source page provided).
3) Internal Revenue Service. Individual Shared Responsibility Provision – Reporting and Calculating the Payment.
4) Healthcare.gov / Health Insurance Marketplace. Hardship exemption information, exemptions & how to apply.
5) Kaiser Health News (KHN). “4 New Ways You Can Avoid Fines For Not Having Health Insurance.”
6) NBC News. Coverage on policy changes and exemption availability.
– Check whether your state currently has a mandate and describe its exemption rules; or
– Walk you step-by-step through collecting documentation for a particular hardship category.