Q: My health insurance policy was terminated because it wasn’t compliant with the ACA. I’ve heard that I’m therefore exempt from the individual mandate. Is that true?
A. Not anymore. This exemption used to be available, but it ended on December 31, 2016. If you were uninsured between 2014 and 2016 because your non-compliant health plan was terminated and you believed that the replacement options available to you were unaffordable, you were eligible for a hardship exemption, and you have up to three years to retroactively claim the exemption.
The hardship exemption applied to canceled grandmothered and grandfathered plans, and can be obtained from your exchange. If you’re in one of the 38 states that use Healthcare.gov, you can download an exemption application here (hardship number 13 is the one that applies in this case, and it’s only available for people who were uninsured in 2016 or earlier). If you’re in a state that runs its own exchange, contact the exchange in your state.
The hardship exemption allowed you to purchase a catastrophic plan regardless of your age or income if your non-ACA-compliant plan was canceled. But that might not have been the best option for you, especially if you were eligible for subsidies in the exchange based on your income. Subsidies are not available for catastrophic plans, which means that people who are eligible for subsidies are almost always better off selecting a subsidy-eligible metal plan instead.
If you received a hardship exemption due to a plan cancellation, you won’t be assessed a penalty for being uninsured prior to the end of 2016. But that exemption will no longer be of use if you were uninsured in 2017, or if you’re planning to remain uninsured in 2018. Note that there is still a penalty for being uninsured in 2018; the GOP tax bill does not repeal the penalty until 2019, so penalties will still be assessed in early 2019, on 2018 tax returns, for people who were uninsured and did not qualify for an exemption.
Regardless of whether you qualify for an exemption, choosing to go without insurance is a very risky option. If you do not enroll in coverage during open enrollment or during the special enrollment period triggered by your loss of coverage, you will be without coverage throughout the coming year unless you have a qualifying event during the year (a change in health status does not count as a qualifying event, so you would not be able to enroll in a plan if you find yourself needing healthcare in the coming year). Open enrollment only occurs in the fall (November 1 to December 15), with all plans taking effect the following January. Keep this in mind if you’re considering going without insurance.
Many people whose non-compliant plans were canceled have found that they qualify for an exchange subsidy that makes their new coverage more affordable than they were expecting. A family of four is eligible for subsidies with an income up to $98,400 in 2018. So before you apply for an exemption of any sort, make sure you shop around for coverage. You may find that the available options offer better coverage and a lower premium than you were expecting.
Also, note that although the hardship exemption triggered by a plan cancellation is no longer available, if your coverage was terminated at the end of 2017, you’re eligible for a special enrollment period (triggered by loss of other coverage) that will continue for the first 60 days of the new year. This means you can enroll in a new plan in January or February and have coverage for the remainder of the year. Open enrollment ended on December 15 in most states, so the special enrollment period triggered by loss of other coverage gives you another two and a half months to select a plan, although coverage is not backdated – if you enroll after December 31, you’ll have a gap in coverage of at least a month, as the earliest possible effective date will be February 1.