Individual Mandate Not Postponed for Anyone, Yet

Yesterday the CMS issued a document, Options Available for Consumers with Cancelled Policies, that describes four options available to people who received notice that their healthcare plans were cancelled.  (I blogged about the cancellations here.)

The first three options aren’t newsworthy: you can buy a new plan from your insurer, buy a plan through the marketplace, or shop outside the marketplace.  The fourth option is newsworthy, because the CMS has for the first time announced that people whose plans were cancelled may qualify for a hardship exemption allowing them to enroll in (cheaper) catastrophic coverage.

Not surprisingly the announcement is receiving lots of attention.  Seth Chandler has a roundup of some of the early news coverage.  Since he posted, Nicholas Bagley blogged here and Jonathan Adler noted the change here.

I am still digesting this interesting news, but have one contribution to the discussion so far.  Many people are saying that those in cancelled plans are now “exempt” from the individual mandate, that having a plan cancelled is now itself a “hardship.”  That is not quite right in a way that obscures an important aspect of this announcement.  The CMS has not exempted anyone with a cancelled plan yet.  Rather, it has stated that those in cancelled plans will be given an exemption if they file a hardship-exemption application stating under penalty of perjury that they cannot afford other policies.  As a result, it is wrong to say this ruling “affects” everyone who had their plan cancelled, as many have assumed.  It only affects people who had their plan cancelled and are comfortable saying (whether it is true or not) that they cannot afford policies available on the exchange.  I can’t say how many people with cancelled plans this excludes, but we should keep this limitation in mind in estimating how many potential beneficiaries this change will take out of the market.

Second, the requirement that people individually apply for exemptions, and state that they cannot afford qualifying plans, is legally important because the relevant aspects of the provision of the ACA that empowers the Secretary to exempt people seems to provide only for “exceptions on a case-by-case basis to those who cannot afford insurance,” as I put it in my post back in October.  So, thanks to this aspect of the announced policy, I agree with Nicholas Bagley that its legal footing is more apparent than that of some of the other ACA implementation delays.

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