The Individual Mandate: Has the Obama Administration Silently Repealed the Rule that Virtually Everyone Must Have Health Insurance?

Maggie Mahar has been featured at Angry Bear Blog and has written for Angry Bear Blog from time to time. This article has been taken from her blog, Health Beat.

Obamacare’s critics continue to argue that the Affordable Care Act (ACA) will self-destruct. Now, some claim the mandate that uninsured Americans must purchase coverage– or pay a stiff fine— is so “riddled with new loopholes and exemptions” it ceased to exist.

14 New Waivers

When the ACA passed Congress in 2010, it offered a handful of basic exemptions to the mandate of everyone must be insured. For example, if the only comprehensive coverage available would cost more than 8% of a household’s income, the fine would be waived. Individuals who were in jail, or belonged to a recognized religious group that objects to all insurance, including Medicare and Social Security, they to could be excused.

But then, late in 2013, the administration quietly added some 14 new ways the uninsured could dodge the fine.. “’This latest reconstruction’ of the ACA received zero media coverage,’ a Wall Street Journal editorial declared, ‘and the Health and Human Services Department (HHS) didn’t think the details were worth discussing in a conference call, press materials or fact sheet.'”

Yet if the new waivers went largely unnoticed, reform’s opponents claim that the swelling list of escape clauses will have a huge impact. By 2016, they say, almost 90% of the nation’s 30 million uninsured will be able to ignore the mandateof buying insurance – without paying the piper. So much for universal coverage.

Just last week Bloomberg reported of; some Republicans referring to the new list of loopholes as a “stealth repeal” of the individual mandate. To her credit, Bloomberg’s Caroline Chen points out the contradiction in the GOP’s arguments. The same critics who, in the past, argued that the mandate represented “unwarranted government coercion” now criticize it for being too “wimpy.” Can they really have it both ways?

“Hardship Exemptions”

The new waivers were designed to help those who are facing hard times. Some exemptions will suspend penalties for 3 months – others for a year.

Perhaps the most important waiver bails out low-income Americans who have the bad luck to live in a state refusing to expand Medicaid. Originally, the ACA stipulated states must extend Medicaid to adults earning less than 138% of FPL ($27,310 for a family of three), with the Federal government paying the lion’s share of the extra cost. At the same time, the ACA set out to help low and middle-income families earning more than 138% of the FPL by providing government subsidies designed to help them purchase insurance in their state exchanges.

But then, two years after the PPACA passed Congress, the Supreme Court blind-sided the reform’s architecture by ruling states could opt out of expanding the federal/state. program. No surprise, politicians in Red states saw this as an opportunity to undermine Obamacare.

Today, twenty-two states still are refusing to open the Medicaid umbrella to cover some of their poorest citizens. As a result and in many cases, only parents earning less than 50% of the FPL ($9,893 for a family of three) qualify for Medicaid for Medicaid and childless adults remain uninsured in almost all of these states. (When Medicaid passed Congress in 1965 legislators decided that only “the worthy poor” should be covered. People who did not have children were not considered “worthy”.)

Now, roughly4 million low income adults who earn too much to be eligible for Medicaid in their states and too little to qualify for government subsidies in the Exchanges have been left out in the cold. As a result, the administration has waved the penalty for this group for at least a year.

By 2016, the situation is likely to change. Politicians who have refused to take the federal aid letting them expand Medicaid are facing tremendous political pressure. Hospitals, in particular, cannot afford to continue to care for uninsured patients without being reimbursed. States like Texas and Florida are leaving millions of federal dollars on the table. They may be the very last to cover their poorest citizens; but over the next year or two, Red States will no doubt cave to the pressure.

Bankruptcy, Domestic Violence, Fires and Floods

Other hardship exemptions cover a wide range of financial catastrophes. For example, you may be excused from the fine if:

– You were evicted in the past 6 months or are facing eviction or foreclosure;
– You received a shut-off notice from a utility company;
– You recently experienced domestic violence;
– You recently experienced the death of a close family member;
– You are homeless;
– You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property;
– You filed for bankruptcy in the last 6 months;
– You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt;
– You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member;
– You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to
give medical support to the child. In this case, you don’t have the pay the penalty for the child;
– As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower
costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace; Your individual insurance was cancelled because it did not meet the ACA’s standards, and you believe other Marketplace plans are unaffordable;
– You experienced another hardship in obtaining health insurance.

The last and very broad escape clause prompted Robert Laszewski, a master spinner of Obamacare myths, to ask:“Is there really an individual mandate?”

Laszewski is not alone in this belief. When the administration announced the new exemptions, The Wall Street Journal’s editors joined the chorus of critics, complaining that originally the ACA reserved waivers for “the truly down and out.” But now, the WSJ argued, Washington was tacking on exemptions that would excuse virtually anyone. The Journal quoted Douglas Holtz-Eakin, president of the conservative American Action Forum. A long-time foe of reform, Douglas quipped; “the rules have become so lax, it seems if your pajamas do not fit well, you do not need health insurance.”

But in fact, the mandate still has teeth. Indeed the CBO estimates that the IRS will collect some $4 billion from those who choose to go it alone in 2016, subtracting the fines from taxpayer refunds. (If you are not due a refund in a particular year, the tax collectors will deduct the penalty from your refund in future years.)

Who Will Be Paying Billions in Fines?

Does this meant that the IRS will be dunning poor and middle-class families who just haven’t heard about the bill—or don’t understand it? By and large, no. The CBO reports two-thirds of those fines will be paidby upper middle class and upper class Americans who object to the PPACA for political reasons.

Most could afford insurance, but bring home too much to qualify for subsides, and as a matter of principle, are rejecting Obamacare. The notion of “shared responsibility” does not move them. They would rather pay a fine than jump into an insurance pool with their fellow citizens. They believe that they are responsible only for themselves and their families.

What Reform’s Opponents Do Understand – the ACA Cannot Survive Without the Individual Mandate

The mandate is as the WSJ has acknowledged; out “at the core of reform.” Without the mandate, its deadlines and penalties, many Americans would simply wait until they became sick and then sign up for coverage. When they recover, they might well stop paying their premiums, and drop the insurance.

If that happened, people who need surgery, chemotherapy, or expensive medications soon would outnumber the healthier and younger folks in the insurance pool. Premiums would spiral for everyone. The system simply cannot afford “free riders” — defined as “people who receive the benefits of “a public good” (like universal coverage) “without contributing to paying the costs.”

In 2014, most people had not yet heard of the 14 new hardship exemptions that were added in December of 2013. This might explain why, last year, the penalties were without a question . . . effective, especially for young people,” Erin Hemlin, health care campaign director for “Young Invincibles,” a group that reaches out to young adults, recently told Politico/Pro.

Hemlin reports on a survey published last May showing that 40 percent of respondents indicated they would not have gotten insurance without the individual mandate. For adults ages 18 to 29, it was even more important, with 42 percent saying they signed up to avoid the fine.

What no one knows is what will happen over the next two years. By 2016, many more Americans will have heard about the waivers. But given the size of the subsidies and the growing number of Americans who have tried Obamcare and like it; I doubt that many will ask for a free pass.

How Many of the Uninsured Will Even Try To Get A Waiver?

What Laszewsi, Holtz-Eakin, the WSJ, and a gang of other Obamcare critics ignore is applying for a waiver is not as simple as it might sound. First, almost all hardship exemptions require documentation to prove that you qualify.

Secondly, while in some cases, you can apply for exemptions when filing your taxes, most require you to fill out a separate three – page form providing extensive information about everyone in your household.

Meanwhile, just applying, providing the documents, and filling out the applications is no guarantee that your fine will be cancelled. Decisions are made on a case-by-case basis. Finally, if you do succeed in being approved, you will receive a certification number in the mail—and then must fill out and file a newly drafted tax form.

Taking all of this into account, how many people will take the time and trouble to apply for a reprieve that, in most cases, will let them skirt the penalty for just three months?

The critics also forget that hard times are likely to make people more risk-adverse, not less. Imagine that you are a battered single mother. Recently, you divorce and your husband’s employer no longer covers you. Would this seem like a good time to drop coverage? What if your home was hit by a hurricane — would you be inclined to ditch your family’s health insurance?

This helps to explain why, as of October 2014, TurboTax estimated that less than 5 percent of those who would qualify for exemptions had applied.

Keep in mind that those who have lost their jobs, or have fallen victim to some other form of financial disaster, may well discover that they now are eligible for Medicaid. Others are likely to qualify for generous government subsidies that will help cover their premiums. Last year, nearly 9 out of 10 people who purchased insurance in state marketplaces qualified for tax credits that cut the average premium by 76 percent—to just $82 per month. Almost half of those who received subsidies wound up paying $50 or less.)

My point is that the majority of the uninsured would be better off if they didn’t try to escape the mandate, and instead applied for government help that would make insurance either free, or very cheap.

Waivers Don’t Just Cancel Fines, They Open the Door to New Coverage

The best hardship exemptions do more than erase the fine. Some let the uninsured apply for coverage in their state exchange after the open enrollment period ends on February 15, while others let those who are down on their luck purchase insurance that doesn’t meet Obamacare’s strict rules for “minimum essential coverage.”

For example, if a natural disaster kept you from enrolling on time, you can sign up after the February deadline. If you received a letter from your insurer telling you that your old coverage was cancelled because of the ACA, this year you can meet the mandate by buying a low premium catastrophic insurance which will offer free preventive care as well as coverage for worst-case scenarios.

In the end, what many Americans don’t understand is that ACA penalties are not aimed at punishing those who opt out of Obamacare. As CEO Kevin Counihan recently told The Hill: “Our goal is not to get income [from penalties] or to make this difficult for folks. Our goal, fundamentally is to get people insured.”