Federal Government Announces Relief from Individual Mandate
Individuals who had their insurance plans cancelled and cannot find other insurance will be breathing a collective sigh of relief. A recent announcement from the Obama Administration states that such individuals will not be subject to penalties for failing to have health care coverage in 2014. In a letter dated December 19, 2013, Kathleen Sebelius, Secretary of the Department of Health and Human Services (“HHS”), stated that consumers who had their health insurance plans cancelled “should qualify for [a] temporary hardship exemption” and that these consumers will also “be able to buy a catastrophic plan to smooth their transition to coverage through the Marketplace.”
This latest announcement follows on the heels of President Obama’s regulatory fix to the wave of plan cancellations. In November, the President stated that insurers could continue to sell non-compliant plans (those plans that do not meet the affordability and value standards under the Affordable Care Act) for 2014, provided that insurers were willing to offer such plans, states were willing to permit their sale, and notices were sent to individuals and small businesses that received a cancellation or termination notice informing them about the availability of coverage through the Health Insurance Marketplace (also commonly known as the “Exchange”). Both of these developments are a response to what many view as a failure by President Obama to keep his promise that if Americans liked their health insurance, they could keep it under the Affordable Care Act.
The so-called “hardship exemption” to the Individual Mandate applies to those who fall within certain categories. For example, the hardship exemption applies to those whose income is so low that they do not have to file a tax return, or those for whom the lowest-priced coverage available would cost more than 8 percent of their household income. This hardship exemption also applies in other instances, such as when a person is homeless or incarcerated. Secretary Sebelius’s letter makes clear that those who qualify for such an exemption because their plan was cancelled could also purchase a catastrophic plan through the Exchange, facilitated through federal and state websites. Catastrophic plans, which are otherwise available only to those under 30 years old, offer coverage for people who need a great deal of care, but they require the insured to pay a greater portion of upfront medical costs. The Secretary reported that the premiums for these catastrophic plans are about 20 percent lower than those for other plans in the Marketplace.
Thus, the HHS guidance provides two options for those whose plans have been cancelled and who believe other available insurance is unaffordable: take the hardship exemption for the coming year or enroll in a catastrophic plan.
The Centers for Medicare & Medicaid Services (“CMS”) also provided guidance regarding the process of applying for catastrophic coverage for those whose plans were cancelled. A CMS release, dated December 19, 2013, states that those seeking catastrophic coverage must submit a hardship exemption form (available at HealthCare.gov); state that their plan has been cancelled; and state that other available coverage is unaffordable. Documentation, including the exemption form and proof of policy cancellation, must be submitted to the potential insurer, which CMS will later verify. Be sure to check back with the Health Law Gurus for other updates regarding the implementation of the Affordable Care Act.
To see the Secretary of HHS’s letter, click here.
To see CMS’s guidance, click here.