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I Don’t Want Health Insurance, and You Can’t Make Me!

A stressed woman with no money looking at her credit card bills and monthly payments. Financial crisis debt.

By some measures, the Affordable Care Act (aka ACA aka Obamacare) added 20 million previously uninsured people to the rolls of the insured. This was accomplished in part through an individual mandate that requires people to either get insured or pay a penalty through their income tax. Most of the previously uninsured welcomed the ability to get access to good health plans and the ability to pay for coverage through their employer or with the help of premium assistance tax credits.
Not everyone might want health insurance, though. Some people, for instance, might prefer to self-fund their health care needs, setting aside cash reserves in a savings account specifically for medical expenses and letting that account earn interest rather than sending monthly premium payments to an insurance company for coverage one might not need.
Is there any way to avoid the individual mandate? Actually, there are several, but the options are limited and not everyone qualifies. Since many states run their own health insurance marketplaces with different rules, this article looks at one state (California) as an example. If you are a resident of another state, the rules that apply to you might be somewhat different.

Getting an Exemption from the Health Insurance Requirement in California

In California, eligible individuals can apply for an exemption through Covered California (the state’s health insurance marketplace) or claim an exemption when they file their California state income tax return.

Applying for an Exemption Through Covered California

California offers three different categories of exemptions through Covered California: a general hardship exemption, an affordability hardship exemption, and an exemption based on religious conscience. Covered California will make a decision on your exemption application within 30 days. They can approve or deny the requested exemption or point out that the application had missing or inconsistent information. Applicants who are denied have 90 days to request an appeal.

General Hardship

You might be exempt from having to get health coverage based on homelessness, eviction, foreclosure, utility shut-off, domestic violence, death of a close family member, a natural disaster, bankruptcy, medical expenses that resulted in substantial debt, unexpected increases in expenses or decreases in income due to divorce, disability or caring for an ill, disabled or aging family member, or other hardships not specifically listed. You’ll need to provide proof to support your claim of hardship.

Affordability Hardship

Health coverage is considered unaffordable when the lowest-cost plan available to you is more than 8.27% (for 2021) of your projected annual household income. You’ll need to provide proof of your expected household income. This exemption is not retroactive and will only exempt you for the remainder of the calendar once the exemption is granted. For a full-year exemption, see the section below about claiming an exemption based on affordability when filing state taxes.

Religious Conscience

People who hold an active federal religious conscience exemption certificate number (ECN) from don’t have to do anything further to claim this exemption. Even without an ECN, you can apply for a religious conscience exemption through Covered California if you or anyone in your household is a member of a recognized religious sect or division who is opposed to acceptance of public benefits or private insurance benefits or who relies solely on a religious method of healing. To claim this exemption, you’ll need to provide proof supporting your claim and an approved IRS form in certain circumstances.

Claiming Exemption When Filing State Taxes

Instead of applying for an exemption through Covered California, the state also offers several different ways to claim an exemption from the health insurance requirement in your state tax filings for the year.

Exemption from the state filing threshold

Not everybody needs to file a tax return. For the 2020 tax year, Head of Household filers under 65 who earned $18,496 or less were exempt from the filing requirement. Individuals with one dependent were exempt with up to $31,263, while those with two or more dependents could have as much as $40,838 in gross income without having to file a return. Income limits differ depending on age, filing status and number of dependents. For instance, a senior over 65 who is married filing jointly with two or more dependents could be exempt from filing with a gross income up to $66,631.

Short coverage gaps

The law allows you to go uninsured for up to three consecutive months without penalty, even if you are otherwise required to be covered.

You can’t afford coverage

For 2021, individuals and households were exempt from the insurance requirement if the lowest-cost Bronze plan or employer-sponsored employee-only plan (for individuals) or the lowest-cost employer-sponsored family plan (for households) amounted to more than 8.27 percent of income.
The law also exempts members of a health care sharing ministry, members of federally recognized tribes eligible for services through an Indian health care provider or the Indian Health Service, the incarcerated, those enrolled in limited or restricted-scope Medi-Cal, and certain others.
When it works as it should, health insurance is a valuable benefit for individuals and families, and the ACA has made it available and affordable to millions. For those who still don’t want it or can’t afford it, limited options are available.

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