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June 2012
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TIME BOMB Exemptions undermining ACA coverage mandate

In 2012 the Obama administration argued before the U.S. Supreme Court that the Obamacare "individual mandate", and more specifically the provision for a fine for those people who failed to sign up for insurance, was essential to the law's survival. Without it, argued administration lawyers, the entire Affordable Care Act would collapse financially.

What to make, then, of a Congressional Budget Office analysis that finds almost 90 percent of the nation's 30 million uninsured won't pay a fine in 2016 under the ACA. The reason? A broad and growing list of exemptions being created by the administration.

Got a notice your electricity is going to be shut off? That qualifies for an exemption. Been the victim of domestic violence? You're exempt. In the country illegally? You're exempt. Belong to a faith-healing sect? If you're not already exempt, you will be soon, and that includes Christian Scientists, for whom specific legislation is advancing through Congress even now.

In all the administration has come up - so far - with 14 hardships people can invoke and not be fined for not having insurance. Suffering fire or flood loss qualifies. So does the recent death of a close family member. Also, if you are being evicted or if you've had substantial medical expenses in the last 24 months that can't be paid, you qualify for an exemption. There's also a catch-all exemption for "people who experienced another hardship" obtaining health insurance.

There are beyond that broader exemptions built into the law. For instance, many people in the 21 states that opted not to expand Medicaid under Obamacare are exempt from the insurance requirement. So are all Native Americans.

And then there's that broad group that got caught in the "if you like your insurance you can keep it" windmill. Many will recall the furor that erupted when millions of Americans had their insurance canceled last year because their policies did not meet the minimum coverage standards required by Obamacare. In an effort to save face, President Obama asked companies to rescind the cancellations. Not all of them could or did. So if you are one of the people who actually lost your insurance due to Obamacare, you too are exempt.

The problem with this development is that the administration's lawyers were correct when they argued before the Supreme Court that the individual mandate is essential to the functioning of the law. The implications of 90 percent of the uninsured avoiding a penalty is ominous, particularly to the extent those who are exempted are younger, healthier individuals.

A lengthy Wall Street Journal article about the exemption statistics quotes insurance executives expressing deep concern about the impact on health insurance premiums if, as is now feared, their insurance pools are disproportionately filled with older people with more health problems. The article quotes a North Carolina insurance actuary as saying the number of more-expensive, older Americans in his company's plans is greater than projected. He told the newspaper the penalty (currently a fine of the greater of $95 or 1 percent of family income) needs to be stronger and the exemptions fewer if the system is to work financially.

This latest troubling finding by the CBO is just one in a growing list of problems that seem to threaten the viability of the ACA. We've previously mentioned on this page concerns from another agency - the Health and Human Services Inspector General's office - that millions of people receiving ACA subsidies are receiving incorrect amounts or aren't entitled subsidies at all. Add it all up, and the finances of the ACA seem to be teetering on the brink.

Time will tell, but Sen. Max Baucus' 2013 warning that implementation of the ACA was shaping up as a "huge train wreck" may yet prove prescient.

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