Hardship Exemption Essential Guide to Health Insurance Relief
961 reads · Last updated: December 18, 2025
The term hardship exemption referred to an exemption granted to individuals who weren't able to afford health insurance due to personal and/or financial circumstances. These exemptions were part of a provision in the Patient Protection and Affordable Care Act (ACA), which was signed into law in 2010. Individuals were required to have acceptable health care coverage or else pay a fee. Individuals who weren't able to afford coverage could apply for an exemption where no penalty was assessed. The fee for uninsured individuals was eliminated in 2019 with the passing of the Tax Cuts and Jobs Act (TCJA).
Core Description
- A hardship exemption is a critical waiver from health insurance penalties when severe personal or financial obstacles make securing coverage unreasonable.
- It plays an important role in protecting individuals during crises such as job loss, natural disasters, or domestic violence, aligning policy fairness with real-world unpredictability.
- Understanding eligibility, documentation, and application requirements is essential for anyone navigating healthcare mandates, especially where state-specific rules apply.
Definition and Background
A hardship exemption originated as a formal relief measure under the Affordable Care Act (ACA). It allows individuals to be excused from the individual mandate penalty if personal or financial circumstances make obtaining minimum essential coverage unreasonable or impossible. The legal basis for hardship exemptions was included in the Patient Protection and Affordable Care Act of 2010 and was further clarified by federal agencies such as the Centers for Medicare & Medicaid Services (CMS) and the Internal Revenue Service (IRS).
The federal penalty applied between 2014 and 2018, requiring most people to maintain health insurance or face a tax penalty. Recognizing that financial crises, significant life events, and natural disasters can make coverage unaffordable or unattainable, lawmakers provided hardship exemptions. The qualifying hardships and application procedures changed over time, particularly after the Tax Cuts and Jobs Act of 2017 set the federal penalty to zero from 2019 onward. While the federal penalty was eliminated, several states—including California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia—introduced or continued their own healthcare mandates, with hardship exemptions as part of their regulations.
Covered Hardships include, but are not limited to:
- Homelessness or imminent loss of housing (eviction, foreclosure)
- Experiencing domestic violence or abandonment
- Natural or human-made disasters (for example, hurricanes, wildfires)
- Death of a close family member
- Substantial medical debt or bankruptcy
- Utility shutoff or interruption of essential services
- Marketplace inaccessibility or errors
- Other income interruptions making coverage unaffordable
Receiving an exemption only waives the penalty. It does not provide insurance, cover medical expenses, or guarantee eligibility for subsidies.
Calculation Methods and Applications
Determining Hardship Exemption Eligibility
Eligibility for a hardship exemption depends on the type of hardship and the applicable regulations, either federal (before 2019) or state-level (current). The exemption can be approved for certain months or an entire year, with requirements that emphasize documentation, timing, and clarity.
Financial Hardships Calculation:
For affordability-based hardship, the cost of the lowest-priced available plan is compared to a set percentage of household income (using the ACA’s Modified Adjusted Gross Income, or MAGI). If this cost is above a specific threshold (typically between 8 percent and 8.5 percent), the person may qualify for an exemption for those months.
Qualifying Event Assessment:
Non-financial hardships—including homelessness, domestic violence, utility shutoffs, and disasters—are assessed based on documentation demonstrating that these events interfered with obtaining coverage. Marketplaces and tax agencies consider the plausibility, relevant documents, and the requested coverage period.
Documentation Standards
Applicants must provide credible, dated evidence that directly supports the claimed hardship, such as:
- Eviction or foreclosure notices
- Police, court, or shelter records (for domestic violence)
- Disaster assistance letters (for example, FEMA)
- Medical bills or bankruptcy filings
- Utility shutoff warnings
- Employer or layoff letters
- Death certificates
In sensitive cases (such as domestic violence), sworn statements may be accepted in place of official documents, prioritizing safety while upholding program integrity.
Application Channels
- Federal Marketplace: Apply via HealthCare.gov for federal categories and to access catastrophic plans for adults over 30.
- State Marketplaces: States with mandates provide their own forms, documentation rules, and online submission systems (for example, Covered California, NY State of Health).
- Tax Filing: For certain exemptions (especially federal exemptions prior to 2019), apply directly on your tax return with forms such as IRS Form 8965.
Example Application Timeline
- Identify a qualifying hardship event within the required time frame.
- Gather all relevant dated documents.
- Complete and submit the appropriate forms to the Marketplace or state agency, or provide codes/certificates when filing taxes.
- Monitor your application status and respond promptly to any requests for additional information.
- If approved, keep exemption certificates and related documents for at least three years.
Comparison, Advantages, and Common Misconceptions
Key Comparisons
| Exemption Type | Basis | Application | Documentation |
|---|---|---|---|
| Hardship | Severe life or financial event | Marketplace/Tax Return | Event proof needed |
| Affordability | Premiums exceed set percentage of income | Tax Return | Financial proof |
| Short Coverage Gap | Less than three months uninsured | Tax Return | Duration only |
| Religious Conscience | Religious beliefs | Marketplace | Sect membership |
| Incarceration | Incarcerated during specific months | Tax Return | Custody proof |
| Not Lawfully Present/Nonresident | Immigration or residency status | Tax Return | Status documents |
| American Indian/Alaska Native | Tribal affiliation | Marketplace/Tax Return | Tribal proof |
Advantages
- Protects Vulnerable Populations: Provides relief for individuals and families facing significant crises such as job loss, disasters, or major debt.
- Promotes Policy Fairness: Adjusts the mandate for real-world circumstances.
- Facilitates Recovery: Offers penalty relief, allowing applicants to focus resources on recovery and, in some cases, grants access to catastrophic coverage.
Disadvantages
- Complex Administration: Navigating forms and requirements can be challenging, especially with differences across states.
- Inconsistencies and Confusion: Differences in state criteria and timelines may result in misunderstandings or missed relief.
- Documentation Sensitivity: Insufficient or incorrect documentation can lead to denials, while incorrect use or misstatement has audit and penalty risks.
Common Misconceptions
- Any financial stress qualifies.
This is not correct. Only specific, documented events recognized by Marketplaces are eligible. - Exemption provides free insurance or subsidies.
It only waives the penalty, not the cost of coverage. - A hardship exemption always leads to a Special Enrollment Period.
Not all exemptions grant this; some allow catastrophic plan access, but not mid-year enrollment. - Documentation can be general.
The evidence must clearly support the hardship claim.
Practical Guide
Step-by-Step for Applying
1. Confirm Eligibility
Review the list of qualifying hardships, such as eviction, natural disaster, bankruptcy, or domestic violence, through HealthCare.gov or your state’s Marketplace.
2. Identify Exemption Type
Decide if the hardship exemption is for penalty relief, catastrophic plan access, or specific state requirements.
3. Gather Documentation
Collect all required documents—dated and official papers are best. Redact sensitive information if necessary, maintain copies, and ensure scans are clear and legible.
4. Complete and Submit Application
Accurately fill out the latest application forms. Include your legal name, tax household details, and specific coverage months. Clearly explain your hardship, with dates.
5. Track and Respond
Monitor your portal, mail, or email for updates. Respond promptly if additional details are needed.
6. Coordinate with Tax Filing
Keep all exemption numbers and approval letters for your records and for your tax filings, especially in states with current mandates.
Case Study (Hypothetical Example)
Maria, a single parent in Oregon, experienced a wildfire in June 2022. She lost her home and could not access her mail or job for several months. Maria collected her FEMA approval letter, employer layoff notice, and temporary shelter registration, then applied for a hardship exemption with her state Marketplace. Her exemption was approved for June through November, removing penalty obligations for those months. This allowed her to use funds for recovery needs. This scenario is hypothetical and not investment advice.
Resources for Learning and Improvement
- HealthCare.gov Hardship Exemption Page:
Comprehensive eligibility and application instructions are available. - State Health Marketplaces:
Examples include Covered California, NY State of Health, DC Health Link, offering state-specific forms, guides, and navigator support. - IRS Resources and Archives:
Forms such as Form 8965 and Publication 5187 provide historical exemption instructions. - Legal Aid Services:
National Health Law Program (NHeLP) and Patient Advocate Foundation offer guidance and appeal support. - Think Tanks and Research Groups:
Resources include the Kaiser Family Foundation, Commonwealth Fund, Urban Institute, and Brookings Institution. - Academic Journals:
Studies in Health Affairs, JAMA Health Forum, and New England Journal of Medicine cover relevant exemption trends. - State Tax Agencies:
State-specific resources are available at the California Franchise Tax Board, NJ Treasury, MA Department of Revenue, and state FAQs. - Data Dashboards and Government Reports:
CMS Open Data, GAO audits, and Covered California enrollment statistics offer additional information.
FAQs
What is a hardship exemption?
A hardship exemption allows individuals to avoid healthcare mandate penalties when significant personal or financial events make insurance unaffordable or inaccessible.
Who qualifies for a hardship exemption?
Eligibility includes events like eviction, domestic violence, disasters, bankruptcy, death of a close family member, or similar circumstances—assessed monthly, with required documentation.
What documents are typically needed?
Examples include eviction letters, court documents, medical bills, disaster relief notices, or employer separation letters. In some cases, a sworn statement is acceptable if documents are not available or safe to provide.
How do I apply, and when should I start the process?
Apply on HealthCare.gov or your state’s exchange. Begin as soon as hardship occurs or during Open Enrollment. For state-mandated penalties, refer to your state’s tax or Marketplace deadlines.
Are hardship exemptions still relevant after the federal penalty ended?
Yes. States including California, Massachusetts, New Jersey, Rhode Island, and DC still require proof of hardship for relief. Hardship certification may also allow adults over 30 to buy catastrophic plans.
Do hardship exemptions provide coverage or financial aid directly?
No. The exemption removes the insurance penalty but does not grant insurance, pay medical bills, or offer premium assistance.
Can I appeal a denial?
Yes. You may appeal denials to the state Marketplace or regulatory agency within the stated period. Additional or clarified documentation may be required.
Does a hardship exemption last the whole year?
Usually, exemptions apply only to the months when hardship prevented coverage. Check approval notices to confirm the covered timeframe.
Conclusion
The hardship exemption serves as a targeted safeguard in healthcare policy, allowing individuals to avoid penalties when real-world crises make insurance unattainable. Knowing what qualifies, how to apply, and which documents to provide enables individuals and families to protect their financial stability during uncertain periods. While the federal penalty ended in 2019, hardship exemptions continue to play an important role in several states and for specific coverage options. Staying informed and organized is essential for securing the relief for which you are eligible when unforeseen events affect your insurance plans.
