Instructions For Form 8965 - Health Coverage Exemptions

Certain employer arrangements. An employee's required

Determining an individual's required contribution—

contribution for employer-sponsored coverage may be affected

Individuals not eligible for coverage under an employer

by various arrangements offered by the employer.

plan. If you or another member of your tax household can't pur-

Wellness incentives. If the employer that offered you (or

chase coverage under an employer plan for a month, the individ-

your spouse) employer-sponsored coverage for 2017 also of-

ual's required contribution for that month is based on the premi-

fered a wellness incentive that potentially affected the amount

um for the lowest cost bronze plan (or if no bronze plan is availa-

that you had to pay towards coverage, the following rules apply:

ble through the Marketplace, the lowest cost metal level plan).

if the condition for satisfying the wellness incentive (in other

Subtract from the premium the maximum premium tax credit that

words, the condition the employee must meet to pay the smaller

you could have claimed if the individual had enrolled in this plan.

amount for coverage) relates exclusively to tobacco use, your re-

For this purpose, use the lowest cost bronze plan (or if no

quired contribution is based on the amount you would have paid

bronze plan is available through the Marketplace, the lowest cost

for coverage if you had satisfied the condition for the wellness in-

metal level plan) that covers everyone in your tax household:

centive. Wellness incentives relating exclusively to tobacco use

For whom a personal exemption deduction is claimed on

are treated as satisfied in determining your required contribution

your tax return,

regardless of whether you would have actually earned the incen-

Who isn't eligible for employer coverage, and

tive had you enrolled in the coverage. If factors other than tobac-

Who doesn't qualify for another coverage exemption.

co use are part of the condition for satisfying the wellness incen-

For information on the lowest cost bronze plan (or if no

tive, your required contribution is based on the amount you

bronze plan is available through the Marketplace, the lowest cost

would have paid for coverage had you not satisfied the wellness

metal level plan) you could have purchased for your tax house-

incentive.

hold, visit

(choose “Claim an af-

Health reimbursement arrangements (HRAs). If the

fordability exemption”) or contact the Marketplace serving your

employer that offered you employer-sponsored coverage for

area. Subtract from the premium the maximum premium tax

2017 also contributed (or offered to contribute) to an HRA that

credit that you could have claimed if these individuals had enrol-

may be used to pay premiums for the employer-sponsored cov-

led in that plan. You can claim the exemption for unaffordable

erage, your required contribution for the employer-sponsored

coverage for the individual if the result is more than 8.16% of

coverage is reduced by the amount the employer contributed (or

your household income.

offered to contribute) to the HRA for 2017, as long as you were

The maximum premium tax credit that you could have

informed of the HRA contribution offer by a reasonable time be-

fore you had to decide whether to enroll in the coverage.

claimed may be zero, for example, if everyone in your

TIP

Health flex contributions. If the employer that offered

tax household is eligible for minimum essential cover-

age other than individual market coverage, such as Medicaid. In

you (or your spouse) employer-sponsored coverage for 2017 al-

so made (or offered to make) a health flex contribution for 2017,

general, if you live in a state that expanded Medicaid and meet

the Medicaid eligibility criteria, you’re eligible for Medicaid if your

your required contribution for the employer-sponsored coverage

is reduced by the amount of the health flex contribution (or offer).

MAGI is less than 138% of the federal poverty line (FPL). See

Federal poverty line

to determine your FPL.

A health flex contribution is an employer contribution to a cafete-

ria plan that may be used only to pay for medical care (and not

If the Marketplace serving the area where the individual re-

taken as cash or other taxable benefits), and is available for use

sides doesn't offer any bronze plan (or if no bronze plan is avail-

toward the purchase of minimum essential coverage. Cafeteria

able through the Marketplace, any lowest cost metal level plan)

plan contributions that may be used for expenses other than

that would cover everyone in your tax household who may be eli-

medical care aren’t health flex contributions and so don’t reduce

gible for the exemption for unaffordable coverage (for example,

your required contribution.

because these members of your tax household are split between

Opt-out payments. If the employer that offered you (or

more than one state), add the premiums for the lowest cost

your spouse) employer-sponsored coverage for 2017 offered

bronze plans (or the lowest cost metal level plan) that would cov-

you an additional payment if you declined to enroll in the cover-

er these members of your tax household.

age (an “opt-out payment”), your required contribution for em-

Use the

Marketplace Coverage Affordability Worksheet

be-

ployer-sponsored coverage is increased by amounts that the

fore filling out the Affordability Worksheet to determine whether

employer offered to pay you for declining the coverage. In some

you or another member of your tax household is eligible for this

cases, an employer may make this opt-out payment only if the

coverage exemption.

employee both declines the coverage and also satisfies another

condition (such as enrolling in coverage offered by the employ-

Example 1—Unmarried individual with no dependents

ee's spouse). If your employer imposed other conditions on re-

and no offer of employer coverage. Eastin is unmarried and

ceiving the opt-out payment (in addition to declining the employ-

has no dependents. His household income is $40,000. He can't

er's health coverage, such as enrolling in coverage offered by

enroll in employer coverage for any month in 2017. The annual

your spouse’s employer), you may treat the opt-out payment as

premium for the lowest cost bronze self-only plan in Eastin's rat-

increasing the employee's required contribution only if you can

ing area is $5,000 and the maximum premium tax credit that he

demonstrate that you met the conditions.

could claim if he had enrolled in this coverage is $1,700. Eastin

For more information on the effect that these arrangements

can claim the exemption for unaffordable coverage for 2017 be-

have on an employee's or related individual’s required contribu-

cause his required contribution is $3,300 ($5,000 minus $1,700),

tion for employer-sponsored coverage, see Notice 2015-87 and

which is more than 8.16% of his household income ($3,264,

Regulations section 1.5000A-3.

which is $40,000 multiplied by 0.0816).

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Instructions For Form 8965 - Health Coverage Exemptions - 2016 Page 9

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