An estimated 500,000 Americans won’t be responsible for tax penalties associated with the Affordable Care Act’s individual mandate, the White House announced this week. The lucky number is a percentage of those who lost their healthcare plans after they were deemed “substandard” under the new law, and have not been able to obtain new coverage.
Health and Human Services Secretary Kathleen Sebelius told a group of senators in a letter that she will use authorities in the law to issue a “hardship exemption” for these individuals, exempting them from 2014 tax penalties.
The HHS will also open up a special, bare-bones catastrophic plan to those who lost their coverage. The plan was originally intended only for those under age 30.
Sebelius said the move will help make up for technological issues that may have prevented many healthcare shoppers from finding new coverage.
“There still may be a small number of consumers who are not able to renew their existing plans and are having difficulty finding an acceptable replacement,” Sebelius wrote in her letter. “These consumers should qualify for this temporary hardship exemption.”
America’s Health Insurance Plans—the industry’s largest trade group—immediately criticized the HHS decision as likely to lead to greater market volatility.
“This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,” said AHIP spokesman Robert Zirkelbach.
Zirkelbach noted that AHIP has already made moves to try to accommodate the 500,000 Americans who have not been able to obtain coverage after losing their original plans. Just last week, AHIP announced carriers would give consumers an extra 10 days to pay January’s premiums and provide retroactive coverage until Jan. 10.
Dan Heffley, regional special master of legislation with NAHU, seconded Zirkelbach and told Insurance Business that while he was unsure if this particular rule change would destablize the market on its own, when coupled with other changes that the administration has announced, it was sure to do some damage.
"Insurance isn't something that can stop on a dime and make adjustments," Heffley said. "You change football rules in the middle of a football game, and it can have adverse effects."
"The White House keeps trying to plug these little holes, and for them, it's easy," he added. "It's much harder for an insurance company."
Heffley said the most recent change is likely to have "cascading effects, some of which can't even be seen."
More than 5mn people were believed to have had their plans canceled because their coverage did not meet new ACA standards. While President Barack Obama said he would allow carriers to temporarily extend those plans into 2014, some states chose to go ahead without the renewal option, fearing it would destabilize the marketplace.
