The Patient Protection and Affordable Care act, also known as, Obama Care is a United States federal statute signed into law by President Barack Obama on March 23, 2010 with the goals of increasing quality and affordability of health insurance, lowering the uninsured rate, and reducing the overall cost of healthcare for everyone.  Since 2010, there has been significant confusion surrounding this topic, however, the Affordable Care Act is now here – enforceable and with penalties.  In order to bring some clarity to the issue, we would like to examine the penalties and exemptions to hopefully shed some light on this very relevant topic.

The fact is that beginning in 2014, you will be required to obtain health insurance, unless you have an exemption.  The current exemptions being offered are as follows:


  • You’re uninsured for less than 3 months of the year
  • The lowest-priced coverage available to you would cost more than 8% of your household income
  • You don’t have to file a tax return because your income is too low
  • You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
  • You’re a member of a recognized health care sharing ministry
  • You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
  • You’re incarcerated, and not awaiting the disposition of charges against you
  • You’re not lawfully present in the U.S.

Hardship Exemptions

  • You were homeless
  • You were evicted in the past 6 months or were facing eviction or foreclosure
  • You received a shut-off notice from a utility company
  • You recently experienced domestic violence
  • You recently experienced the death of a close family member
  • You experienced a fire, flood, or natural or human-caused disaster that caused substantial damage to your property,
  • You filed bankruptcy in the last 6 months.
  • You had medical expenses you couldn’t pay in the last 24 months
  • You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
  • You expected to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child.  In this case, you do not have to pay the penalty for the child.
  • As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.
  • You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
  • Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.

If you do not qualify for any of the exemptions listed above and do not obtain health insurance by March 31, 2014, the penalty, or “individual responsibility payment”, will be calculated one of two ways.  You will end up paying whichever is the greater amount.

1% of your annual household income.  The maximum penalty is the national average yearly premium for a bronze plan

$95 per person per year ($47.50 per child under 18).  The maximum penalty per family using this method is $285.

This is the fee for 2014.  In 2015, it will increase to 2% of annual household income or $325 per person.  In 2016 and on, it will be 2.5% of annual household income or $695 per person.  After that it will be adjusted for inflation.  This individual responsibility payment will be paid when you file your 2015 taxes, which are due April 15, 2015.

The final piece of information you need is how to apply for an exemption.  You can apply for an exemption using the appropriate form on or you can claim your exemption when you file your 2014 taxes.  If you plan to go the second route, it would be smart to double-check with a tax professional to ensure you qualify for an exemption.


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