You are probably reading this because your family is experiencing a hardship in obtaining health insurance. As you are aware, you are now required to obtain health insurance under the Affordable Care Act (Obamacare). However, the prices for coverage are skyrocketing.
For example, for my family of four, the least expensive plan on my state's exchange has monthly premiums of $1351.85 for 2017, with a deductible of $13,900. According to the MNSure website (my state's exchange), the average total expense under this plan would be $23,182, which would include the monthly premium plus average out-of-pocket expenses. In a "bad year," according to the website, the total cost would be $30,522.
For my family, this amount is not affordable. We have solved the problem by joining a health sharing ministry, which exempts us from the requirements of Obamacare. You can read more about our experiences with our health sharing ministry at my blog. For many families, a health sharing ministry would be an excellent choice, and I encourage you to learn more about it. However, for various reasons, that might not be an option for everyone.
If you don't fall under an exception and fail to sign up for coverage, there is a penalty. For 2017, that penalty will be 2.5% of your total household income (up to a maximum of $2085), or $695 per adult plus $347.40 per child, whichever is greater. For example, if you are a family of four with an income of $50,000 per year, the penalty would be $2085.
This is obviously an absurd situation. You're required to have insurance, which is now much more expensive because of the "Affordable" Care Act. If you don't have enough money to pay for it, you're expected to come up with the money to pay the penalty. But if you couldn't afford the insurance, then you probably can't afford the penalty.
Fortunately, you don't need to pay the penalty if you are suffering from a "hardship." Of course, in my book, the mere fact that you can't afford to buy the required insurance shows that you are suffering a "hardship." But the bureaucrats who run the program use a different definition. You have to prove that you fit under that definition, and you need to send the Government copies of documents proving that you have a "hardship."
Depending on exactly what kind of "hardship" you are facing, there are different document requirements, and there are different procedures to follow for claiming the hardship. Some of these are quite confusing, and many of them require you to submit very personal information to the Government.
The full instructions provided by your Government can be found at this website.
The actual form you will need for most of them, Form 0938-1190, can be found at this link. (If you simply left click on the link, you won't get the form. For some reason, the Government doesn't want you to view the form in your browser. Instead, you need to right click on the link, download the PDF form to your own computer, and then open the file on your own computer.)
The twenty pages of official instructions for filling out the form are available at this link.
Fortunately, you only need to fit into one "hardship" category. Therefore, it's probably best to find the category that is easiest to prove, and requires the least amount of intrusive paperwork.
More complete information about all of the exemptions is available on the HealthCare.gov website. The full list of exemptions is at that site:
In all of these cases, the hardship exemption generally applies for a total of three months: The month of the hardship, the month before, and the month after. So even in cases of what most of us would consider extreme hardship, such as homelessness, death in the family, or a major fire, you're only off the hook for three months. In other words, if you bare your soul to the government and tell them about a death of a family member, and send them the required documents proving your story, you're still stuck with the penalty for the other nine months of the year.
But as we look through this list, one "hardship" stands out as being less severe than the others. And more importantly, it's a hardship that's much easier to prove, because all you need is a single document to cover you for three months. That hardship is receiving a shut-off notice from a utility company.
This "hardship" does not require that the power actually be shut off. It merely requires that you received a shut-off notice. If you get a shut-off notice, then you are not responsible for the Obamacare penalty for that month, for the month before, and for the month after. In other words, if your electric utility sends you a shut-off notice on February 5, then you don't have to pay the Obamacare penalty in January, February, or March. And all you need to prove the hardship is the notice you received in the mail.
If you are a person who is struggling to the point where you can't afford health insurance, then you're probably familiar with what a shut-off notice looks like. There are times when you don't have enough cash to pay the electric bill, and you need to let it go for a little while. Eventually, you get the shut-off notice in the mail. You generally have a week or two after getting the notice to pay your bill, or at least come up with a payment plan. Utilities send out a lot of shut-off notices, but in most cases, the power never actually gets cut off. But for your hardship exemption, they don't need to shut off the power. All you need is the notice, and it's good for three months.
The procedure for obtaining this exemption is more complicated than it needs to be, but it's still worthwhile if you otherwise will be stuck paying a penalty of over $2000. It does require some advance planning. The most critical step is making sure that you have proof of the hardships, spaced three months apart. If you receive disconnection notices in February, May, August, and November, then you'll be taken care of for the entire year. The February notice will take care of January through March. The May notice will take care of April through June. The August notice will take care of July through September. And the November notice will cover you for October through December.
Of course, you don't know exactly when the utility will send the disconnection notice. Therefore, it's probably best to work with more than one utility, to make sure you have enough notices and that they are spread out throughout the year.
If you've had financial difficulties, you have probably already received such notices. You should start saving them. If you don't currently get them, then you'll need to start delaying your utility payments. If you've been a good customer, it might take the utility a few months to send the first disconnection notice. As I write this, it is late October 2016. If you will need the hardship exemption starting in 2017, then you should probably start delaying your utility payments now. If you get the first disconnection notice in January, then it's good for January and February. If you don't get it until February, that's ideal, since it's good for the first three months of the year, and you don't have to worry about getting another one until May. But if you don't get one until March, then you'll be stuck with the penalty for January unless you can come up with a different hardship exemption. For this reason, it's important to stop paying your utilities as soon as possible. If you are set up on a "budget" plan with any of your utilities, you will probably need to cancel these plans to ensure that you recieve your shut-off notices in a timely fashion.
You're probably a responsible person, and the idea of purposely paying your utility bills late is probably something you don't want to do. After all, it's not the electric company's fault that you face a health insurance penalty. But this is the simplest way to prove your exemption. And this won't be a real problem for the utility. You will probably have to pay a late fee to the utility, so they'll make up any lost profits easily. And their penalty will be much less than the $2000 Obamacare penalty. They'll be doing you a service by providing the required notices, and their late fee will be a reasonable cost for providing this service.
The Obamacare rules and forms don't provide a definition for what is a "utility." However, your electric, natural gas, and water bills are certainly "utilities." Chances are, your telephone bill is also a "utility," and perhaps your cable TV bill would qualify. To be on the safe side, I would concentrate on getting disconnection notices from electric, natural gas, and water utilities. Electric companies will probably be the most reliable sources of these notices.
When you receive your first notice, first make a note of the date. You will need another one within three months. So at that point, pay your bill in full to stop the actual disconnection, and then wait for the next notice to arrive. When you have this piece of hardship evidence in your hand, then you need to go through the bureaucratic steps to claim the exemption. This is a two-step process.
First, you will need to fill out and send in the Hardship Exemption Form, Form 0938-1190. (Remember, you will need to right click on the link and save the file to your own computer before opening it.)
You'll want to review the official instructions for the form. Fortunately, for purposes of the utility exemption, you'll only need to worry about two pages from the instruction book, pages 9-10.
You start on page 2 of the form. Boxes 1-7 on this page are straightforward. Simply fill in your name and address. If your mailing address is the same as your home address, click the bubble next to line 8, and the address will automatically fill itself in. If you get your mail somewhere else, you'll need to fill in that address in boxes 8-13. For boxes 14-15, fill in your phone number(s) and best time to call. If you wish, you can add your e-mail address to line 16.
In boxes 17A and 17B, you can select the language you prefer to use. Conveniently, English is at the top of the list. Other possible languages are listed in apparently random order.
On the top of page 3, you fill in your name again, and add your date of birth, sex, and social security number. On line 6a, most people will check "yes," if you plan to file a tax return. If you are married filing jointly, you should check "yes" on line 6a, and enter your spouse's full name on the line below that.
If you have dependents on your tax return (normally your children), you enter the number of children on line 6b, and enter their full names in the box below that.
Line 7 asks, "do you want this exemption?" This is a rather curious question, since you wouldn't be filling out the form if you didn't want the exemption. Therefore, you will check "YES."
We finally get to the heart of the matter. You will finally explain why you are entitled to the exemption. You should check box number 3, "Shut-off notice." Fill in the year of the hardship next to that. If you are new to being uninsured as of January 1, 2017 (along with millions of other Americans), you should fill in "2017".
The next line asks for the date the hardship started. It's unclear to me which date you should use. Let's use an example that your shut-off notice was dated February 7, 2017. Since you are entitled to the exemption starting the month before, I would enter "January 1, 2017." Probably, if you enter "February 7, 2017," you will automatically get the prior month.
If you are mailing the form soon after receiving the shut-off notice, and before you resolved the problem, then the hardship is still happening. Therefore, you should leave the "date hardship ended" box blank. Instead, check the box marked "check if ongoing."
You do NOT need to fill in the box toward the bottom of this page for "please explain how this hardship prevented you from getting health insurance." That box only needs to be filled in if you check "you experienced another hardship" on line 14. Your shut-off notice is an automatic exemption, and you are not required to explain anything more.
If you wish, you can fill out the optional information about your race and ethnicity on lines 9 and 10 of the form. Your Government assures you that this information will not be used against you.
On page 4, you need to sign the form and fill in the date you signed it. You also need to make a copy of your shut-off notice, and mail it along with the form. Hold on to the original shut-off notice for your records. It would be a good idea to keep it with your other tax papers.
When it's all ready, you should mail the form to the following address:
Health Insurance Marketplace - Exemption Processing
465 Industrial Blvd.
London, KY 40741
In about two weeks, you will hear back from the Government. If you've followed all of these instructions, it will be approved. They will mail you a notice showing an "Exemption Certificate Number" and the approved dates of the hardship. It should cover a total of three months. Keep this notice with your tax records, because you will need it on April 15!
Theoretically, you could wait until the end of the year to file your form 0938-1190. You can just include all of the shut-off notices you've received for the entire year. However, it is probably better to do them one at a time. If, for some reason, one of them is not approved, you can solve the problem if you learn about it early enough. For example, if there's a time gap, then you might need to apply for one of the other exemptions (with more documentation required) for that period.
If you do them one at a time, you'll need to file at least four copies of form 0938-1190 during the course of the year, since each shut-off notice is good for only three months. Because the exact timing of your shut-off notices can't be predicted, you'll probably need to file more than four copies of form 0938-1190. If you time things perfectly, you can use shut-off notices from February, May, August, and November. But let's say, for example, that you get one of your shut-off notices early, in April. When you file it, you'll need to file the next one a month early, in July instead of August. But as long as you send in one shut-off notice at least every three months, you will qualify for the exemption for the full year.
To make sure that you have enough shut-off notices, it is probably a good idea to pay all of your utilities late. That way, if the electric company doesn't send a shut-off notice when you need it, you will probably get one from the water utility.
Of course, make sure you keep enough money on hand to pay the utility bills when you do get the shut-off notice. You should have at least a few days to pay after getting the notice, but if you neglect it, your utilities really will get shut off.
At the end of the year, you will have four or more notices, each containing a set of dates and an Exemption Certificate Number. You will need these documents when you file your income taxes. So if you started your adventure as an uninsured American in 2017, you'll need to include a new form when you file your taxes on April 15, 2018.
That new form is IRS form 8965. The instructions for this form are at this link.
You will fill out Part 1 of this form. As you see, you will need to list all of the people in your household, and include all of the Exemption Certificate Numbers that you received throughout the year. When you include this form with your tax return, you will not need to pay the Obamacare penalty.
I fully realize that all of the information on this page is absurd. Your local utility companies have nothing to do with health insurance. But millions of Americans are being punished for not having enough money to buy insurance. They have to pay what amounts to a tax on being poor. The "shut-off notice" exemption can provide these Americans with a way to legally avoid this unfair tax. Many of them will have no choice but to follow the absurd procedure explained here.
The author of the this page happens to be an attorney, but the information on this page is not intended as legal advice. Before using this information, read all of the official instructions that are linked. If you have any questions, please consult with your own attorney. This information was current as of October 2016. Please check for any updates, as this page has not been updated since then.
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Copyright 2016, Richard P. Clem.
Attorney Richard P. Clem is responsible for the content of this page.
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Richard P. Clem, Attorney
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