Obamacare exemptions: Too complicated to claim?

Millions of Americans without health insurance risk fines from the IRS, but at least half of them are eligible for waivers – if they can figure out how to claim them.

Millions of Americans qualify for waivers from the most unpopular part of President Barack Obama's health care overhaul. But getting that exemption could be an ordeal.

Community groups are concerned about a convoluted process for waivers from the law's tax penalty on people who remain uninsured. Not everyone is complaining, however: Tax preparation companies are flagging it as a business opportunity.

The law's requirement that Americans carry health insurance remains contentious. Waivers were designed to ease the impact.

But while some exemptions seem simple, others will require math calculations.

Some involve sending in the application – by mail – and supporting documents, such as copies of medical bills, police reports, obituaries, utility shut-off notices – even news articles. Consumers will have to dig up the documentation – it's not like filing the W-2s they get from employers.

Two federal agencies have roles, each with its own waivers and time schedules. Some people will apply directly to the Internal Revenue Service when they file their 2014 tax returns next year. They'll use a new Form 8965.

Others can start now and seek an exemption through HealthCare.gov. If it's approved, they'll get a number to put on their IRS form later on.

It will all come to a head this tax-filing season.

Hailed by Democrats as the fulfillment of historical aspirations for covering all Americans, the Affordable Care Act has turned out to have multiple issues. The debut of online insurance markets last fall became an embarrassment for the White House. It took two months to get the website working reasonably well.

Waivers are part of the law's complex relationship with the tax system, an area of potential complications just starting to emerge.

"The process for claiming an exemption is confusing, even for people who do this every day," said Elizabeth Colvin of Foundation Communities, an Austin, Texas, nonprofit that provides services for low-income people.

"If you are a do-it-yourself person who is going to try it on pen and paper, all I can say is, 'God be with you,'" said Mark Ciaramitaro, vice president of health care services at tax giant H&R Block.

At Intuit, maker of TurboTax, software engineers and tax lawyers teamed up to create "Exemption Check," a free online tool for people to see if they qualify. Charges apply later if the taxpayer files through TurboTax.

"I would say that it is complex," said Sacha Adam, Intuit's team leader. "That is where we get excited."

The requirement that individuals carry health insurance took effect this year, alongside the law's major coverage expansion. Although an estimated 10 million people are no longer uninsured, "Obamacare" remains divisive in the congressional elections. Soon after election day, HealthCare.gov's second open enrollment gets underway.

From Nov. 15 to Feb. 15, people who don't have access to job-based coverage can sign up for private insurance that is subsidized by tax credits. As open enrollment winds down, tax filing season will go into high gear, and people will start seeing the new connections between health care and taxes.

Those who got too big a tax credit this year through HealthCare.gov will have their tax refunds reduced to pay it back. And those still uninsured will be scrambling to check out penalty waivers.

Of the roughly 30 million to 40 million uninsured people, about 20 million are estimated to qualify for one or more exemptions. That includes people in the country illegally.

The penalty is sometimes dismissed as puny, just $95. But that's an over-simplification. The penalty is actually the greater of two numbers, $95 per person in 2014, or 1 percent of household income above the threshold for filing taxes.

Take a hypothetical single woman who makes $25,000 a year as a call-center operator and was uninsured all of 2014. She would owe a penalty of $148.50. (1 percent of $14,850 – her income above the 2014 tax filing threshold, which is $10,150.)

For 2015, the penalty will rise to the greater of 2 percent of income, or $325.

Many of the people facing fines are low-income workers, a group the law was intended to help.

Some exemptions, including membership in certain religious groups, were spelled out in the law. The administration expanded the list to address the trying circumstances of people living from paycheck to paycheck.

The IRS webpage lists 16 exemptions. But some general categories allow people to qualify due to different specific circumstances.

For example, HealthCare.gov's hardship exemption lists 14 different subcategories, including homelessness, threatened eviction or foreclosure, unpaid medical bills, and if someone attests to being a victim of domestic violence.

Some waivers should be simple, such as the ones for people who didn't make enough money to file income taxes or for those who were only briefly uninsured.

But a seemingly important exemption for people whose employer coverage doesn't meet the law's test of affordability isn't easy to figure out.

"Many people are going to need help," said Zach Reat, director of work support initiatives for the Ohio Association of Foodbanks in Columbus. "There's definitely the potential for people getting tripped up."