Is the Individual Mandate Dead? No. (But It’s Been Ailing for a While)

As the deadline for purchasing health insurance on the Obamacare exchanges approaches, there’s plenty of talk about who’s been exempt from the requirement to have insurance. A lot of people on the right are arguing that recent decisions about the mandate mean it’s basically dead: Charles Krauthammer said Wednesday that exemptions to the mandate, previously “narrowly defined,” have “now been redefined so that all you have to do is claim that going into the exchange would create a hardship,” “without any documentation.” The Wall Street Journal wrote that “amid the post-rollout political backlash, last week the agency created a new category” of exemption, though it’s not clear what that’s supposed to be, whether it’s an exemption for those who saw their plans canceled or those with “another hardship” in obtaining health insurance.

Neither of these categories is new: They were both on the original list of 14 hardship exemptions to the mandate, released in late December 2013. Two things were announced last week: — as is well known, people can now renew until 2016 plans that aren’t compliant with the ACA and would have been canceled, as long as state insurance commissioners permit it. But less publicized is the fact that people whose plans were canceled now don’t have to pay a penalty in 2014, 2015, or 2016, which will be somewhat disruptive (I explained the problems this can create back in December when it was announced they were exempt for 2014). Those issues will pertain to a lesser extent in 2015 and 2016, but for now that’s a long way away. Both of these pieces of news are weakenings of the mandate, but not for 2014.

There’s no new magically broad exemption that’s shredding the mandate to help out people who become ininsured in the future and the currently uninsured. Now, there is an ambiguous “another hardship” that apparently wasn’t listed in one list of the possible hardships for the past few months. CMS just added it this week — which is absolutely a sinister move, but not one that is going to prevent people from streaming out of the law. Why?

The broad-sounding exemption applies to people who claim the following:

14. You experienced another hardship in obtaining health insurance.

Where people receiving other exemptions (such as bankruptcy in the last six months, which requires bankruptcy papers) are told what documentation they have to provide, there’s just a request:

Please submit documentation if possible

Sounds . . . easy, but a lot of people also seem to be under the impression that no further explanation is necessary, which isn’t true. On the exemption application, it says the following:

Unless you’re applying for hardship #12 (Medicaid ineligibility) or #13 (cancellation), please explain how this hardship kept you from getting health coverage for the time period for which you’re requesting an exemption.

So even if this isn’t a new feature, as some are implying, is it broad enough to essentially invalidate the mandate? That’s up to HHS.

“Simply filling out the form does not guarantee an exemption,” a CMS official informed NRO, and the requests will supposedly be reviewed manually. When a person fills out an exemption application, sends it in, and gets approved, he’ll have an exemption number to provide to the IRS when filing their taxes that they shouldn’t be liable for the mandate penalty.

For now, the vague criteria they’re laying out suggests you can’t just offer any old reason: A CMS official says that Exemption #14 allows the regulators “to make sure to account for unique circumstances which may cause individuals to have hardship that are not anticipated in the other categories,” so the explanation would presumably have to rise to the level of the other categories — bankruptcy, homelessness, a pending appeal with CMS, etc. CMS can either grant it or reject it, or ask for documentation and further explanation. “The premiums are really high” or “I’m a regular SoulCycler so I don’t need Obamacare and certainly can’t afford it now” wouldn’t qualify, by those lights. There’s no standard people literally have to meet, but one example granted in Massachusetts that’s not on the ACA form was having a house foreclosed. Whatever explanation they do offer will presumably be under penalty of perjury.

Some conservatives have suggested that the fact that many of the uninsured spurning the exchanges are doing so because premiums are unaffordable means they can get a #14 exemption. Current policy suggests they won’t, since the law has already set a standard for “affordability” (as long as premiums are under 8 percent of income).

This is not to say the mandate will survive: Yuval suggested back in December, when the one-year exemption for those with canceled policies was announced, that the logic of it easily lead to even broader exemptions. He pointed out, quite rightly, that “they are now declaring the direct consequences of Obamacare itself [cancellations of non-comprehensive plans] to be a hardship.” That leaves a wide door for future exemptions (the law lays out a couple and then lets “the secretary” define further “hardship” exemptions, which is what populate the form), but HHS hasn’t opened it yet. Certainly, given the political quandaries created by the fixes so far, HHS may have to do so.

But the genesis of the idea that the mandate is already scrapped is similar to the myth that the IRS lacks much power to enforce it. Sure, it can’t put a tax lien on your house or take you to court over it, so you can refuse to pay it on your taxes. But any year you get a refund, the IRS can charge you the mandate penalty then by reducing your refund, retroactive a few years.

It’s quite possible to see how the mandate will eventually collapse entirely, but for now conservatives needn’t get ahead of the facts, and it’s worth noting just that, even without any more shenanigans, it isn’t that strong:

Already exempted are all of the people who had their plans canceled last year (though most all of them did end up buying insurance), anyone for whom premiums exceed 8 percent of income or whose income would make them eligible under Medicaid expansion but can’t get Medicaid because their state didn’t expand it, etc.

It’s only 95 dollars or 1 percent of income this year, whichever’s more — for many Americans, the latter is a lot more, but 1 percent of income isn’t a huge amount for anyone. Even when the penalty rises in future years, hitting 2.5 percent of income or $295, it’s still going to be a lot less than ACA premiums for most Americans — which makes it weak.

It’s only effective if people are aware of it, and there are indications most people don’t know they’ll be subject to a penalty if they go uninsured and don’t or can’t claim a hardship. Some navigators may be trying to inform them of it, but their politicians certainly aren’t. You’re hearing much more about how the plans are affordable than you do about how they look even more “affordable” when you consider you’d have to pay a not-insubstantial penalty if you don’t buy one. The political reasons for that are clear, but if people hear about the law mostly from their politicians, especially President Obama, it’s a policy problem. Even before politics leads him to weaken the mandate again.

Patrick Brennan — Patrick Brennan is a writer and policy analyst based in Washington, D.C. He was Director of Digital Content for Marco Rubio's presidential campaign, writing op-eds, policy content, and leading the ...

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