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individual insurannce mandate

Reform Update: Obamacare's insurance mandate could be toothless in 2014

By Paul Demko
Posted: March 20, 2014 - 4:15 pm ET

The Obama administration has made the individual mandate its line in the sand for the Patient Protection and Affordable Care Act. Despite delaying or tweaking numerous provisions—most notably the requirement that businesses with more than 50 employees provide coverage—federal officials have refused to yield on the insurance requirement for individuals.

The financial penalty isn't particularly onerous in the first year. It's 1% of income or $95, whichever amount is higher. The penalty rises to 2.5% of income, or $695, in 2016. The Congressional Budget Office estimates that 6 million people will pay a penalty that year (PDF), a total of $8 billion in fines.

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But the individual mandate is likely to prove a paper tiger in 2014 for two other reasons: the availability of hardship exemptions and lax enforcement.

The application for a hardship exemption lists 14 different qualifying categories. They include people who would have qualified for Medicaid under the law, but their states have opted not to expand Medicaid. Exemptions are also available to individuals who have been homeless, victims of domestic violence, filed for bankruptcy or had their existing plan canceled.

And the final category listed on the application is the broadest: “You experienced another hardship in obtaining health insurance.” The evidentiary standard for proving that hardship? “Please submit documentation if possible.”

“Basically anyone who wants to be able to claim a hardship exemption will probably be able to,” said David Howard, a professor at Emory University's Rollins School of Public Health. That's a view held widely among both the law's supporters and detractors.

In order to seek an exemption, though, one would have to know that such a possibility exists. Given that polls have repeatedly shown that Americans remain largely ignorant of the specific provisions of Obamacare, that seems unlikely to happen. There doesn't appear to be any coordinated effort by opponents of the law to alert individuals about the possibility of hardship exemptions.

But lack of rigorous enforcement is still likely to result in few financial penalties in the first year of the individual mandate. That's in part a political calculation by the Obama administration, Howard said.

“I think they feel it's important legally and symbolically to have a mandate in place,” Howard said. “On the other hand they recognize that enforcing it to the T would cause a lot of angst, a lot of political problems for Democrats in tight Senate and House races.”

That raises the specter that the mandate will be ignored and won't attract the volume of customers—particularly young, healthy ones—necessary to create a balanced risk pool. But Karen Davis, a health policy expert at Johns Hopkins University and former president of the Commonwealth Fund, argues that generous subsidies will still provide a strong inducement to acquire coverage for those who could seek out a hardship exemption.

“Nearly all of those are going to be very low income individuals who are going to qualify for substantial subsidies,” Davis said of the people who might qualify. “I just don't see these examples undermining the stability of the risk pool.”

Nebraska Medicaid expansion vote falls short

Efforts to expand Medicaid in Nebraska appear to be dead for 2014. Supporters of a measure that would have expanded access to government-funded coverage for households with incomes up to 133% of the federal poverty threshold came up six votes short on Wednesday in seeking to end a filibuster in the state's unicameral Legislature. “Next year, we'll go at it again,” said state Sen. Sara Howard, a co-sponsor of the bill, according to the Omaha World-Herald.

State exchanges' enrollment sees uptick

More than 100,000 individuals have now signed up for private plans through Colorado's exchange. During the first half of March, roughly 15,000 individuals enrolled in coverage—or nearly the same total that signed up during all of February. New York's exchange has topped 325,000 enrollments in commercial plans. That figure has increased by about 50,000 since the start of the month. And Covered California announced this week that it has surpassed 1 million enrollments.

Follow Paul Demko on Twitter: @MHpdemko

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