Millions in Health Coverage Gap Seek to Avoid Tax Penalty

Enrollment drives are being held across the country to help people beat Sunday’s deadline to sign up for health insurance through the federal marketplace.

But in Texas and nearly two dozen other states where millions of people fall into a so-called coverage gap, the outreach effort has involved more than just signups.

Nonprofits and other health groups are making sure these people know what steps to take to avoid a federal penalty for not having insurance.

About four million Americans fall into the coverage gap, earning too little to qualify for federal subsidies for private insurance but too much for Medicaid.

The hole has become so noticeable that the Internal Revenue Service on Monday issued a form for taxpayers in the 22 states that didn’t expand Medicaid to claim an exemption if their household income is equal to or less than 138 percent of the federal poverty level, or about $16,104 for an individual or $32,913 for a four-person household. Undocumented immigrants, prisoners and members of Indian tribes are also exempt.

People in the gap can file for hardship exemptions. The U.S. Treasury estimates between 10 and 20 percent of taxpayers will claim an exemption.