Monday, August 11, 2014

Revisited: The Total Evisceration of the Individual Mandate. 98.8% of Americans Won't Pay It

Thirteen months after we began covering the topic, one of America's big four newspapers is further exploring the idea.  The individual mandate has been wholly gutted for purely political reasons and its not coming back to life. 

I was on the Michael Berry Show this morning discussing the matter.

My discussion on the individual mandate's gutting began in July of 2013 on the Armstrong and Getty Radio Show:

After churning through a year of legal battles culminating at the U.S. Supreme Court, proponents of Health Reform realized they did not have the political fortitude to fine a large swathe of their constituency for not buying health insurance.  Subsequent to winning at the Supreme Court in their argument that the individual mandate was in fact a "tax", the Obama Administration quietly issued 14 "hardship" exemptions to the law's already existing eight statutory exemptions.

It is perfect example as to why no single political party can ever implement a complex law replete with twenty-plus taxes and fees.  When it comes time to collect, the negative aspects are demagogued, re-election aspirations trump policy decisions, and we end up with escalating deficits as the painful portions of a scheme are repealed, amended or softened to avoid political unpopularity.

We are up to 22 different ways a person can opt out of Obamacare.  In fact, if you can't generate an exemption for yourself, you aren't even trying.  If you can fog a mirror, you have a 99% chance of excusing yourself from the individual mandate.

The Congressional Budget Office (CBO) now estimates that only 3.9 million Americans will pay that mandate in 2016.  We have approximately 319 million people in our country.  Hence, 1.2% of Americans will actually pay the fine.  The CBO recently updated this estimate to account for the continually expanding list of exemptions:

 Here is the full list of exemptions from
  1. You’re uninsured for less than 3 months of the year
  2. The lowest-priced coverage available to you would cost more than 8% of your household income
  3. You don’t have to file a tax return because your income is too low (Learn about the filing limit.)
  4. You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
  5. You’re a member of a recognized health care sharing ministry
  6. You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
  7. You’re incarcerated (either detained or jailed), and not being held pending disposition of charges
  8. You’re not lawfully present in the U.S. 
  9. You were homeless.
  10. You were evicted in the past 6 months or were facing eviction or foreclosure.
  11. You received a shut-off notice from a utility company.
  12. You recently experienced domestic violence.
  13. You recently experienced the death of a close family member.
  14. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
  15. You filed for bankruptcy in the last 6 months.
  16. You had medical expenses you couldn’t pay in the last 24 months which resulted in substantial debt.
  17. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
  18. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you do not have the pay the penalty for the child.
  19. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.
  20. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
  21. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.
  22. You experienced another hardship in obtaining health insurance.  

To its credit, Forbes covered this topic quite well in October of 2013 here.

This is from Stephanie Armour writing at the Wall Street Journal earlier this week:
Almost 90% of the nation's 30 million uninsured won't pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement. 
The architects of the health law wanted most Americans to carry insurance or pay a penalty. But an analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions. ... 
The Obama administration has provided 14 ways people can avoid the fine based on hardships, including suffering domestic violence, experiencing substantial property damage from a fire or flood, and having a canceled insurance plan.  Those come on top of exemptions carved out under the 2010 law for groups including illegal immigrants, members of Native American tribes and certain religious sects. 
Factoring in the new exemptions, the congressional report in June lowered the number of people it expects to pay the fine in 2016 to four million, from its previous projection of six million. Also bringing down the total: At least 21 states have opted not to expand the Medicaid insurance program for lower earners under the health law, and those residents may be exempt from the penalty. 
A legal battle over subsidies provided through the federally run insurance exchange could increase the number of Americans entitled to exemptions. In July, a Washington, D.C., appeals court struck down the federal exchange's authority to issue insurance tax credits on the grounds that the health law limits them to state-run exchanges. A Virginia appeals court upheld the subsidies, setting up a legal fight that is likely to go before the Supreme Court. ... 
The exemptions are worrying insurers. The penalties were intended as a cudgel to increase the number of people signing up, thereby maximizing the pool of insured. Insurers are concerned that the exemptions could make it easier for younger, healthier people to forgo coverage, leaving the pools overly filled with old people or those with health problems. That, in turn, could cause premiums to rise. 
Patrick Getzen, vice president and chief actuary at Blue Cross and Blue Shield of North Carolina, said he saw more "older and sicker people" enrolled in 2014 than projected. He attributed some of that to the weakened mandate. "With a stronger penalty and less broad exemptions, that would be better for the risk pool." 
The Obama administration argued before the Supreme Court in 2012 that the individual mandate was an essential component of the law's insurance-market changes, and the court narrowly upheld it on the grounds it is a tax. Now, Republicans who oppose the law say the administration has undermined that requirement with the exemptions and should waive the mandate entirely. 
"If your pajamas don't fit well, you don't need health insurance," said Douglas Holtz-Eakin, former director of the Congressional Budget Office and president of the American Action Forum, a conservative think tank. "It basically waives the individual mandate." ... 
In December, a hardship application form was released that laid out the 14 exemptions. Among other things, people could avoid the penalty if a close family member had died recently, if they were facing eviction or if they had medical expenses that couldn't be paid in the last 24 months and resulted in substantial debt. 
Critics have assailed one exemption for people who "experienced another hardship obtaining health insurance" as too broad. That exemption asks for documentation if possible but doesn't require it. 
Damian Trujillo, 33 years old, of Salt Lake City, said he is hoping for an exemption under that category. The rehabilitation-facility caseworker went online during the enrollment period but was ineligible for tax credits, he said, and decided he couldn't afford federal-marketplace coverage. ... 
Nathan Maxwell, 37, also doesn't expect to pay the penalty. He belongs to a health-care sharing ministry, which is exempt under the law. ... 
CMS said about 77,000 individuals and families had requested an exemption as of April, the most recent data available. That doesn't capture everyone likely to apply because many exemption requests can only be claimed on tax returns filed next year. ...