How the White House Sort of Delayed the Individual Mandate

by Patrick Brennan

After it was reported Wednesday night that President Obama planned to postpone the enforcement of a key part of his health-care law, the White House confirmed to the Washington Post’s Sarah Kliff that it has indeed “tweaked Obamacare.” The change in the law is characteristic of such moves in the past: It’s both an attempt to remedy a flaw in the bill as passed (viz., the decision to offer tax-credit subsidies on federally run exchanges) and a response to a problem that’s unfolded as the law’s been implemented (viz., the delay of the employer mandate).

According to the Post, what the White House did, essentially, was to exempt from the individual mandate penalty anyone who enrolls in an acceptable plan by March 31 and maintains coverage for the rest of the year. The White House is claiming that the “timing hasn’t changed” and the “deadline for having insurance is March 31,” but this wasn’t the practical implication of the IRS’s final interpretation of the law.

Under the law as written and as the IRS interpreted it, anyone who goes without coverage for three consecutive months in a year has to pay a penalty. Just one day of coverage within a given month counts, but health-insurance plans usually begin on the 1st of the month, so if one doesn’t have coverage officially on March 1, he is likely uncovered for all of March, and therefore owes the penalty. (It also takes a certain amount of time to enroll and pay one’s premiums.) Almost certainly, buying a plan on March 31 would not be sufficient — if all the healthy 24-year-olds that Obamacare’s risk pools need treated March 31 the way they usually do a “deadline,” they’d have owed the substantial penalty.

It’s possible some insurers could tweak the days their coverage begins, but as the Post explains, tax-preparation firm Jackson Hewitt judged earlier this month, and the White House confirmed, that customers would generally have to finish their enrollments and pay their first premiums by the middle of February to avoid paying the penalty — because it will take two weeks for the insurance companies to enroll them, and they would usually need to be enrolled before March 1 to be covered on March 31.

Now, as long as one is enrolled in a Healthcare.gov-halal plan by March 31, regardless of when the coverage actually begins (within some reasonable limits, presumably), one is exempt from the penalty.

What’s important, and surely part of why the adjustment’s been made now: This would have also applied to people who submitted their applications at some more responsible date, but who couldn’t officially enroll and begin paying their premiums for weeks or months after – whether because Healthcare.gov’s glitches persist or because insurers take a long time to approve their enrollments. Of course, they’d have to have their purchases confirmed and keep paying the premiums throughout the year, but now, having agreed to purchase a plan by March 31 appears to count.

This basically buys six weeks’ time for Healthcare.gov and the apparently huge problems that have cropped up when trying to transmit customers’ data to insurance companies so they can actually be enrolled and avoid the penalty. And that penalty is no small thing: It’s not a paltry $95 a year for most individuals, as many people have assumed — in 2014, it’s $95 or 1 percent of family income, whichever is higher, meaning the average American household would pay about $500 for forgoing insurance next year. That will rise to 2.5 percent of income, or a minimum of $695, by 2016.