Is Obamacare individual mandate cracking?

The White House loosened the rules for Obamacare on Thursday, telling people whose health insurance plans got canceled that they won't have to comply with the law's individual mandate in 2014. How is that fair? critics ask. Many foresee more changes ahead.

Eric Gay/AP/File
Rosemary Cabelo uses a computer at a public library to access the Affordable Health Care Act website in San Antonio, Dec. 11, 2013. The White House announced Thursday night that people whose health insurance plans got canceled won't have to comply with the law's individual mandate in 2014.

Good news for people who’ve lost their health insurance because it doesn’t meet "Obamacare" standards: The White House announced Thursday night that it’s going to cut these folks something of a break.

They won’t be subject to the Affordable Care Act’s individual mandate for 2014, meaning they won’t have to pay a tax penalty if they don’t get coverage for next year. They’ll also be eligible to buy so-called catastrophic insurance plans, which are inexpensive but cover only big medical expenses.

“The President and I want to do everything we can to ensure that individuals with canceled plans have as many options as possible,” wrote Secretary of Health and Human Services Kathleen Sebelius in a letter to Sen. Mark Warner (D) of Virginia that outlined the changes.

The cancellation of policies purchased in the individual health insurance market, for not meeting ACA regulations, caused a political uproar that forced the Obama administration’s hand on this issue. The White House said about 500,000 people who lost plans but have not yet found new insurance will be helped by these changes. Other estimates put the number of individuals who lost insurance due to the onset of Obamacare in the millions.

President Obama previously said that insurers could restore these policies if they wished. Some insurers and states said it was too late to go back, however, making Thursday’s move almost inevitable.

The question now is whether the individual mandate to buy insurance, the heart of Mr. Obama’s signature domestic achievement, will be further softened in the months ahead. The administration has been adamant that it won’t delay the requirement, saying it’s needed to get people to sign up in large enough numbers to make Obamacare work. But now they’ll face renewed political pressure to allow others to opt out for 2014.

“This puts the first crack in the individual mandate. The question is whether it’s the last,” writes Ezra Klein at the Washington Post’s "Wonkblog."

In fact, even prior to Thursday’s move the individual mandate was not an absolute requirement. The Affordable Care Act as passed contained substantial mandate exemptions.

For instance, people whose employers don’t offer an adequate plan don’t have to have health insurance if the cheapest ACA “bronze” policy available on the state exchange marketplaces would cost more than 8 percent of their annual income. There’s also a generalized “hardship exemption” that exempts you from the mandate if you’re facing an unforeseen difficulty, such as homelessness or divorce.

For the purposes of the law, the administration has now defined losing your previous health insurance due to its noncompliance with ACA as a “hardship.” That’s how it managed Thursday’s move. But that raises a difficult question, the law’s critics note. If people who had insurance, but lost it, are now exempt from Obamacare due to hardship, what about people who didn’t have insurance in the first place? Isn’t their situation just as difficult?

Plus, what if you lost your insurance, but have managed to make it through the hoops of HealthCare.gov and purchase a new policy? Can you ditch that and buy a cheaper catastrophic plan?

“How can anyone make health care decisions today knowing that the law may be unilaterally changed tomorrow?” complained House majority leader Eric Cantor (R) of Virginia in a statement after the White House announcement.

On the other side of the issue, insurers aren’t happy. Given the realities of the ACA, they want as many people to sign up for new policies as possible, and particularly as many healthy young people as possible. Softening the individual mandate threatens their economic projections.

“This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,” says Karen Ignani, head of America’s Health Insurance Plans, an industry Washington trade group.

In that context, it’s important that the administration announced this change in a letter to a purple state Democratic senator. As Ezra Klein points out, congressional Democrats will be a key to what happens next on the mandate. If they believe that Thursday’s move is enough to end their political problem from canceled plans, they won’t push for more exemptions. But if they don’t, look for a tumultuous January on Capitol Hill.

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