No Obamacare penalty for few in some niche government plans: IRS

WASHINGTON (Reuters) - The Obama administration on Thursday said people enrolled in some small, government-sponsored healthcare plans will not face a penalty under Obamacare in 2014, even though their coverage does not meet the healthcare reform law's minimum requirements. In proposed rules released by the Internal Revenue Service, the administration said narrowly defined government coverage including programs limited to family planning or tuberculosis-related services through Medicaid do not meet minimum essential coverage standards. Ordinarily, President Barack Obama's Patient Protection and Affordable Care Act would require someone who lacks minimum coverage to pay a penalty. But the IRS is proposing that individuals in certain plans pay no penalty for failing to have minimum essential healthcare for this year. These individuals may be eligible for a premium tax credit to get healthcare coverage on a state or federal health insurance marketplace, the proposed rules said. The exemption includes people deemed medically needy due to crippling healthcare costs, enrollees in special Medicaid demonstrations and military personnel enrolled in programs with limited eligibility. The announcement comes on the heels of an administration decision to offer hardship exemptions to people who had their individual policies canceled last year because they fail to meet Obamacare's standards for minimum coverage. That decision was part of the administration's response to a public outcry that devastated Obama's poll numbers and worried Democratic lawmakers. But Thursday's proposed rules, which would affect a small but undetermined number of people, have been in the works since at least last August, when the IRS published regulations on the individual mandate. Obamacare requires most Americans to be enrolled in health coverage by March 31 or pay a 2014 penalty of $95 or 1 percent of annual household income, whichever is higher. The penalty is scheduled to rise in subsequent years. (Reporting by Patrick Temple-West; Editing by Eric Walsh)