When fairness goes out the window, you know politics has caused the White House to take its Obamacare scramble to a whole new level.The administration said Thursday night that people with canceled policies will not be subject to the individual mandate in 2014. This is huge, but you wouldn’t know it from Health and Human Services Secretary Kathleen Sebelius’ letter announcing the change, which she sent in response to senators worried that those who saw their health insurance policies canceled this fall did not “consider” Obamacare replacement policies to be affordable.
In the letter to six Democratic senators, Sebelius tried to downplay the impact of announcing consumers with canceled policies would qualify for a “hardship exemption” from the Affordable Care Act’s requirement they have insurance in 2014. She characterized those affected as “a small number” and said “the population of individuals with canceled plans who do not have quality, affordable coverage for 2014 is clearly shrinking.”
But it would be a mistake to believe this most recent regulatory change is not very important.
Giving those with canceled policies a “hardship exemption” means they will be allowed to purchase catastrophic insurance through Obamacare exchanges. Previously such plans were only available to Americans under 30 or those who could not find ACA plans that cost less than eight percent of their income. As Ezra Klein has pointed out:
A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. Why don’t people who couldn’t afford a plan in the first place deserve the same kind of help as people whose plans were canceled?
In other words, if you had individual market insurance before the ACA, you have more choices now than if you did not. Sebelius’s extension of the hardship exemption to Americans who lost their insurance this year creates just the kind of uneven playing field Obamacare was supposed to eliminate with a total reset of the individual insurance market in 2014.
In addition, Sebelius is essentially implying that a situation the Obama administration has rightly anticipated for years — that insurers would cancel plans in the fall of 2013 if the plans did not comply with ACA rules — creates a special kind of unforeseen “hardship.” The original individual mandate hardship regulations were issued long before insurers began canceling plans this fall. According to the Centers for Medicare and Medicaid Services (CMS), a person was to qualify for a hardship exemption if:
1. He or she experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan;
2. The expense of purchasing a qualified health plan would have caused him or her to experience serious deprivation of food, shelter, clothing, or other necessities;
3. He or she experienced other circumstances that prevented him or her from obtaining coverage under a qualified health plan.
There is no reasonable interpretation of these guidelines that lines up with what Sebelius is saying now. Even if the general public was surprised when policy cancellation letters started showing up in mailboxes this year, the termination of many individual market plans was hardly “an unexpected natural or human-caused event.” As Sebelius said in her letter Thursday, there’s huge turnover in this market every year. Likewise, there’s nothing about having a policy canceled that makes it more difficult to obtain new Obamacare coverage (let’s assume the administration does not believe that having your individual insurance policy canceled means buying a replacement policy will cause “serious deprivation of food, shelter, clothing, or other necessities”).
Offering further clarification in June 2013 about what would qualify a person for a “hardship” exemption, CMS said a person could get a hardship exemption if he or she:
- becomes homeless;
- has been evicted in the past six months, or is facing eviction or foreclosure;
- has received a shut-off notice from a utility company;
- recently experienced domestic violence;
- recently experienced the death of a close family member;
- recently experienced a fire, flood, or other natural or human-caused disaster that resulted in substantial damage to the individual’s property;
- filed for bankruptcy in the last 6 months;
- incurred unreimbursed medical expenses in the last 24 months that resulted in substantial debt;
- experienced unexpected increases in essential expenses due to caring for an ill, disabled, or aging family member;
- is a child who has been determined ineligible for Medicaid and CHIP, and for whom a party other than the party who expects to claim him or her as a tax dependent is required by court order to provide medical support. We note that this exemption should only be provided for the months during which the medical support order is in effect; or
- as a result of an eligibility appeals decision, is determined eligible for enrollment in a QHP through the Marketplace, advance payments of the premium tax credit, or cost-sharing reductions for a period of time during which he or she was not enrolled in a QHP through the Marketplace, noting that this exemption should only be provided for the period of time affected by the appeals decision.
With this latest change, a new circumstance is added to this list:
- Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.
Up until this point, there was a plausible argument to be made that most of the other ACA exceptions, exemptions and delays announced in the last year were made in the name of fairness. Employers were supposedly having trouble getting their paperwork and computers systems in line to comply with the employer mandate, so it was delayed a year — for all employers. Consumers trying to buy new plans through HealthCare.gov were struggling to navigate a dysfunctional website, so the deadline to sign up for coverage was extended from Dec. 15 to Dec. 23 — for everyone shopping through HealthCare.gov.
In contrast, the Obama administration’s changes in response to political fallout from individual market plans being canceled this fall — allowing states to extend existing plans for an extra year and this new hardship exemption — are something else. Thursday’s change puts those with canceled policies in a unique category that offers them a different kind of coverage and the ability to disregard the individual mandate, a major tenet of the law, which does not seem fair to those who did not have insurance prior to the law and who would very much like to buy a catastrophic plan but cannot. Republicans have already pounced on this latest change to argue that if Obamacare rules are simply too onerous for the small subset of Americans whose policies were canceled this fall, then they are too onerous for everyone else as well.