DHHS Offers Hardship Exemption from Tax Penalty to Certain Individuals

On May 2, 2014, the U.S. Department of Health and Human Services (DHHS) issued new guidance, entitled “Special Enrollment Periods and Hardship Exemptions for Persons Meeting Certain Criteria.” Under section 5000A of the Internal Revenue Code, beginning January 2014, nonexempt individuals who do not have minimum essential (health care) coverage (MEC) or who are not otherwise exempt are required to make a shared responsibility payment with their federal income tax returns. Section 5000A(e)(5) of the Code authorizes the Secretary of DHHS to determine hardship exemptions. 


In March, 2014, DHHS had announced guidance that permitted consumers who were “in line” to enroll for insurance coverage in the Affordable Care Act (ACA) marketplaces by the March 31 deadline to be eligible for a hardship exemption from penalties for the months prior to the effective date of their coverage.  Under the newest guidance, DHHS determined that other individuals were “similarly situated” and, therefore, decided to “extend a comparable hardship exemption for all months prior to the effective date of coverage for those individuals who obtained MEC effective on or before May 1, 2014 outside of the (ACA) Marketplace”.  The latest guidance notes that this exemption is available in states with a federally facilitated marketplace or a state-based marketplace.