The Obama administration has made clear that Americans won't be penalized if they fail to get health coverage because their states don't expand Medicaid
eligibility or because the cost of family coverage offered through their employer is out of reach.
In a final rule issued Wednesday (PDF)
, the administration outlined an array circumstances that would exempt an individual from the healthcare reform
law's mandate to carry health insurance.
Other circumstances that would trigger an exemption include the absence of plan available on the state's health exchange, which could be a significant issue if insurance carriers
aren't interested in certain areas. Mississippi officials suggested recently that 36 of its 82 counties wouldn't be served by plans that have signed up so far.
The instances involving the holes in Medicaid eligibility and employer-based family coverage reflect an attempt to mitigate unintended consequences of the Patient Protection and Affordable Care Act. HHS and the IRS signaled those exemptions in draft rules early this year.
Also exempt are people who don't qualify for Medicaid or subsidized coverage because they immigrated illegally. Some Republicans want the mandate to apply to immigrants who seek legal status on a “path to citizenship” under immigration reform legislation.
As a result of the U.S. Supreme Court's ruling on the law a year ago, it was easier for states to opt out of the provision calling for Medicaid programs to add millions of beneficiaries who didn't qualify because their incomes were slightly higher than the federal poverty level or their states limited coverage to families with dependent children and pregnant women.
The new regulations clarify that residents in states that don't expand Medicaid—and make too little to qualify for subsidized coverage in the exchanges—will be exempt from the mandate.
The affordability of family coverage exposed a technical glitch in the statute. When the cost of individual plans exceeds 9.5% of a person's income, the worker qualifies for subsidies to buy coverage in an insurance exchange. The law is silent on the eligibility for tax credits based on the cost of family coverage. The Kaiser Family Foundation has estimated the glitch could affect 3.9 million Americans.
The final regulations also explain which categories of exemptions will be handled by the exchanges and which would be provided through the tax filing process.
The Congressional Budget Office has estimated that less than 2% of Americans will owe penalty, referred to as a “shared responsibility payment.”