Friday, December 20, 2013

Obamacare officially declared a "hardship" by HHS

Last night, yet another "rule change" came down, with regard to the implementation of the Patient Protection and Affordable Care Act, i.e. Obamacre. This latest change was undertaken at the behest of a group of Democratic Senators in order--in theory--to help those people who have seen their plans cancelled and are faced with only more expensive options through the exchanges. According to the law, the great majority of Americans are required to have health insurance coverage by the New Year, with a deadline of December 23rd for enrolling through the exchanges if they are not yet covered. This is the much-vaunted (and much-criticized) individual mandate that is the very basis of Obamacare, the thing that allows it to work.

But that mandate is becoming more and more meaningless. The Administration had already made numerous changes to the law, relaxed standards and extended deadlines, in the face of harsh criticism from the public since the big rollout of the website. This latest move, however, may effectively lead to the collapse of Obamacare, for the Administration--through HHS--is essentially allowing that the law itself, Obamacare, constitutes an actual hardship that can be used as an excuse to avoid the individual mandate. Let's delve into the specifics. This is the memo sent out by HHS defining the rule change. I quote:
The Affordable Care Act provides many new consumer protections. In some instances, health insurance issuers in the individual and small group markets are cancelling policies that do not include the new protections for policy or plan years beginning in 2014. Because some consumers were finding other coverage options to be more expensive than their cancelled plans or policies, President Obama announced a transition period allowing for the renewal of cancelled plans and policies between January 1 and October 1, 2014, under certain circumstances. Some states have adopted the transitional policy, enabling health insurance issuers to renew their existing plans and policies. Some health insurance issuers are not renewing cancelled plans or policies.

To ensure that consumers whose policies are being cancelled are able to keep affordable health insurance coverage, we are reminding consumers in the individual market of the many options already available to them, and we are clarifying another option for consumers in the individual market...

If you have been notified that your individual market policy will not be renewed, you will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage. If you believe that the plan options available in the Marketplace in your area are more expensive than your cancelled health insurance policy, you will be eligible for catastrophic coverage if it is available in your area. In order to purchase this catastrophic coverage, you need to complete a hardship exemption form, and indicate that your current health insurance policy is being cancelled and you consider other available policies unaffordable. You will then need to submit the following items to an issuer offering catastrophic coverage in your area: (1) the hardship exemption form; and (2) supporting documentation indicating that your previous policy was cancelled.
Follow that? If you had your policy cancelled by an insurance company--for whatever reason--you can
get a hardship exemption. Period. All you need to do is fill out the paperwork and send it in with a copy of the cancellation letter. You don't need to demonstrate that the available options are more expensive than your old policy or anything like that. And you're not actually required to buy the "catastrophic coverage" at all, but are simply allowed to do so if you wish, once the hardship exemption has been rubber stamped. There's no mechanism beyond this, so in effect people who receive the hardship exemption under this rule change can simply not carry any health insurance. Of course, if they get sick, they can immediately go out and buy coverage.

Here is Kathleen Sebelius' reply to Senator Mark Warner (Democrat, Virginia), who appears to have spearheaded the call for this kind of change. In it, she allows what is codified in the above memo: that individuals who have had their plans cancelled "should qualify for a temporary hardship exemption." As she notes, there was indeed a "hardship exemption" written into the Affordable Care Act all along. So let's go look at it (I'm quoting the relevant sections, only):
26 USC § 5000A - Requirement to maintain minimum essential coverage 
(a) Requirement to maintain minimum essential coverage
An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.
(e) Exemptions
No penalty shall be imposed under subsection (a) with respect to—

(5) Hardships
Any applicable individual who for any month is determined by the Secretary of Health and Human Services under section 1311 (d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.
This is the portion of the law that establishes the individual mandate. "Applicable individuals" refer to the great majority of the population and failure to comply with the requirement results in a penalty, this we all know. But there are a number of exemptions to the requirement. The one that concerns us is number five, "Hardships." According to the law, the determination as to what constitutes a hardship is at the discretion of the Secretary of HHS (currently Kathleen Sebelius), as outlined in "1311 (d)(4)(H)." So what is that, exactly? Never fear, for I have it as well:
(H) subject to section 18081 of this title, grant a certification attesting that, for purposes of the individual responsibility penalty under section 5000A of title 26, an individual is exempt from the individual requirement or from the penalty imposed by such section because—  
(i) there is no affordable qualified health plan available through the Exchange, or the individual's employer, covering the individual; or  
(ii) the individual meets the requirements for any other such exemption from the individual responsibility requirement or penalty;
The stipulation of "affordable" in (i) is actually already established by rule: a health insurance policy whose premiums exceed 8% of income. So this new change--the idea that people who have had their plans cancelled are undergoing a hardship--necessarily falls under (ii), since there is no income requirement in the memo from HHS quoted above. But guess what? These other exemptions are mostly codified already in 26 USC § 5000A and are not "hardship" exemptions. What's left as a basis for the latest rule chamge? Only the hardship requirements established by HHS. Here they are, from June of this year (my boldface):
A principle in implementing the individual shared responsibility provision is that the shared responsibility payment should not apply to any individual for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time. The final regulation largely reflects the proposed rule, with minimal changes, and implements this principle. For example: Hardship Exemption Clarified to Protect Individuals, Address Key Concerns. The statute gives HHS authority to exempt individuals determined to “have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.” In developing this final regulation, HHS considered circumstances that constitute a hardship in obtaining such coverage. To provide clarity for individuals facing these circumstances, the HHS final regulation enumerates several situations that will always be treated as constituting a hardship and therefore allow for an exemption. Hardship exemptions will be available to the following groups of individuals:

o Individuals for whom a Marketplace projects that no offer of coverage that meets the minimum value standard will be affordable;

o Individuals who are ineligible for Medicaid solely based on a state’s decision not to implement the Medicaid expansion under the Affordable Care Act. This rule will protect individuals in states that, pursuant to the Supreme Court decision, choose not to expand Medicaid eligibility;

o Individuals who in addition to one or more employed members of his or her family have been determined eligible for affordable self-only employer-sponsored coverage, but for whom the aggregate cost of employer-sponsored coverage for all the employed members of the family is unaffordable.

o Certain individuals who are not required to file an income tax return but who technically fall outside the individual shared responsibility provision’s statutory exemption for those with household income below the income tax filing threshold;

o Individuals who are Indians (as well as their spouses and descendants) who are eligible for services through an Indian health care provider.
 
The HHS final rule also provides that the hardship exemption will be available on a case-by-case basis for individuals who face other circumstances that prevent them from obtaining coverage under a qualified health plan. Consistent with the preamble to the proposed rule, we are also providing concurrent guidance providing the criteria Federally-facilitated Marketplaces will use to determine eligibility for the hardship exemption. State-based Marketplaces may also use these criteria.
None of the bullet points applies, leaving only the part in bold as justification for the rule change. Thus, the rule change is based on HHS' ability to determine hardship on a case by case basis. And that determination has been made, with regard to circumstances that are exactly the same (thus allowing the general rule) for all of the people who will be impacted by this rule change: the implementation of Obamacare has led to their loss of coverage. That's their hardship: the law, itself. Nothing else. And because they face the requirements of the law and are unhappy about those requirements (for good reason, I might add), they are being granted "hardship exemptions."

Stunning.

And patently unfair, as a matter of course, since all of those people who had their policies cancelled but have since purchased new policies were never given this option. Of course, this rule change isn't about helping people or making Obamacare work (especially since it is actually undermining the principle mechanism of the law), it's about election politics. It's about a bunch of Democratic Senators who are up for reelection and are scared to death of what the Obamacare rollout is doing to their chances of retaining their seats.

Cheers, all.

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