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You are here: Home / Anderson On Health Insurance / Mandate exemption expansion

Mandate exemption expansion

by David Anderson|  December 22, 20139:28 pm| 14 Comments

This post is in: Anderson On Health Insurance, The Math Demands It

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By training I was a policy guy.  By career, I’m a symbolic analytical plumber.  By hobby, I’m a political junkie.

The recent announcement that individuals whose non-PPACA compliant individual plans are being cancelled on Jan. 1, 2014 is first and foremost a political decision with plumbing and policy impacts.

Ezra Klein from earlier this week:

The individual mandate includes a “hardship exemption.” People who qualify can either ignore the individual mandate altogether or purchase a cheap, bare-bones catastrophic insurance plan that’s typically only available to people under 30.

2. According to HHS, the exemption covers people who “experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan.”

3. Today, the administration agreed with a group of senators, led by Mark Warner of Virginia, who argued that having your insurance plan canceled counted as “an unexpected natural or human-caused event.” For these people, in other words, Obamacare itself is the hardship. You can read HHS Secretary Kathleen Sebelius’ full letter here. HHS’s formal guidance is here.

The political reason is to save a net one or two Democratic Senate seats next fall by removing middle and upper class PPACA losers from being overwhelmingly pissed off.

So what are the plumbing and policy implications?

From a plumbing side, this is another validation/verification caveat that needs to be built into healthcare.gov and the state level exchanges.  Individuals over the age of 30 were previously not eligible to buy catastrophic coverage.  Now there is a small class of people who are over the age of 30 and are catastrophic coverage eligible.  Membership in that class must be verified by crosswalking into a different set of databases that can output data in 834 format but no one has spent any time speccing out the actual problem set.  This is a pain in the ass but doable, but it is not reliably doable for Jan. 1, 2014, so I’m betting it will be a user reported check box with validation later on.

On a policy side, I’m under the opinion that there is sufficient flexibility and risk readjustment to handle basically any one year exemption for sub-populations of the general American population. The short story is the risk pools get slightly sicker for the first year with  the new exemption.

Individuals with current non-PPACA compliant insurance tend to be slightly healthier than the average person in the Exchange risk pool.  Most people with good rates have those rates because they passed medical underwriting.   Individuals who either were in guaranteed issued products or uprated will be going into the Exchange risk pools no matter what.  Age bands between the Exchange buyers and individual market insurance are roughly similar.

Some proportion of these people will decide that the risk of running naked if they live in states that are not allowing insurance companies to offer non-compliant products, or continuing to be covered by non-compliant products is a worthwhile risk.  Individuals with non-compliant but Silver or Gold like products will probably tend to buy into the market.  The interesting question will be how many medically underwritten policy holders will decide to buy Exchange Catastrophic coverage and thus get into the general risk pool or run naked?  Catastrophic coverage is attractive to young males, so if there is a large number of this group leaving the Exchange risk pool, there will be a small general weakening of the pool.

If this was a permanent exemption, I would be concerned.  However a one year exemption with a small population and significant back-end risk balancing mechanisms makes this a temporary plumbing pain in the ass with minimal long term policy implications.

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Reader Interactions

14Comments

  1. 1.

    raven

    December 22, 2013 at 9:31 pm

    What’s the deal with all the whining from the insurers?

  2. 2.

    raven

    December 22, 2013 at 9:31 pm

    dupe

  3. 3.

    The Red Pen

    December 22, 2013 at 9:46 pm

    I’m repeating a question I had for Richard a few days ago (now OT): If a provider needs a certain number of contracted providers to offer a policy, then what happens if they all “go Galt” and leave the network. Does that leave the policy-holders stuck without providers?

    This is a nightmare scenario that wingnuts like to promote.

  4. 4.

    GHayduke (formerly lojasmo)

    December 22, 2013 at 9:52 pm

    LOL. On a completely unrelated search for “zero percent chance”…8/10 results were Snowman saying there is “zero percent chance” his documents were seen by Russia or China.

    Kill me.

  5. 5.

    cmorenc

    December 22, 2013 at 9:59 pm

    @The Red Pen:

    If a provider needs a certain number of contracted providers to offer a policy, then what happens if they all “go Galt” and leave the network. Does that leave the policy-holders stuck without providers?

    This is a nightmare scenario that wingnuts like to promote.

    Pre-ACA, what was preventing this exact same Galtian dynamic from occurring? NOTHING. What differences exist which made it less likely to occur pre-ACA than after? NONE.

    For that matter, wingnuts act like no insurance company ever cancelled a policy on anyone until the Affordable Care Act came along and forced them to start doing so.

  6. 6.

    BD of MN

    December 22, 2013 at 10:01 pm

    @efgoldman: I’m leaning towards “it’s the week between xmas and new years and half the office is gone so now the rest of us actually have to work…”

  7. 7.

    fuckwit

    December 22, 2013 at 10:01 pm

    Great analysis. Thank you very much for explaining all this stuff so clearly.

  8. 8.

    Culture of Truth

    December 22, 2013 at 10:27 pm

    Not surprised this is happening. Of course the american people want all the benefits without any of the hardships or mandate. And as usual the GOP goes along while the Democrats are forced into the position of the “responsible” party.

  9. 9.

    satby

    December 22, 2013 at 10:28 pm

    Well, I enrolled in a silver plan today (thanks Richard, for gaming out the COBRA options for me earlier). Took 25 minutes total. Now my challenge is to convince my 30 y/o son he should enroll. He’s been without it almost all his adult life so it’s a hard sell. He doesn’t make that much and just is resistant to even looking.

  10. 10.

    lurker dean

    December 22, 2013 at 10:35 pm

    appreciate all your informative posts, richard. wish the media would cover these issues as well as you do.

  11. 11.

    JoyfulA

    December 22, 2013 at 11:40 pm

    In PA, the Blues have “always” had community rating for individual policyholders: Your first year, any preexisting condition is not covered, and then you are in the “individual group.” At least that’s how I’ve understood and lived it.

    My husband’s individual Highmark policy of 10 years was canceled. He tried many times to get onto the ACA website, and got hung up early. (He has a lot of ad blockers, virus blockers, etc., that could be part of the problem, in my opinion.) He called a couple of times and got put on hold for 5 minutes, after which the call was dropped; once in December, he was told anything that could be done over the phone wouldn’t take effect for at least 6 weeks.

    So he got a letter from Highmark offering a new plan for otherwise dropped policyholders. Looking at the ACA data, he wouldn’t get a subsidy (he’s disappointed; to me, that’s like being disappointed you made enough money to pay income taxes), he’s in the highest age bracket, and he smokes, so he’d be paying about the same under ACA as he had been paying. He had an appointment with Highmark, went in (they have mall offices), and bought a Highmark policy at about the price he had been paying ($500/month).

    He figures once he quits smoking for a year (the time required for the category “nonsmoking”), the frenzy quiets, and the website works, he’ll try ACA again. In fact, I wonder if he isn’t actually under ACA now, but I’ll know when all the paperwork shows up.

  12. 12.

    pseudonymous in nc

    December 23, 2013 at 12:05 am

    @Culture of Truth:

    Of course the american people want all the benefits without any of the hardships or mandate.

    And as I’ve said before, they want the cost benefits of community rating but special snowflake discounts because they’ll never need [whatever]. They imagine that they can have a hyper-individualised insurance policy but can’t grasp what it might mean to be in a risk pool of one.

    It makes me wonder, beyond politics and policy, what people actually want healthcare financing to look like. And like many things in America, I think the right-wing answer is built upon an assurance of what That Person Over There can’t have.

  13. 13.

    Gian

    December 23, 2013 at 1:27 am

    I don’t know if you’re still checking comments on what looks like a dead thread.

    from my bank’s warning notice (as the media hasn’t really educated me on just what information was taken…)

    Is my identity at risk?

    Based on the information we have regarding this incident, it is unlikely that identify theft would occur because personal information required to steal your identity, such as your Social Security number, date of birth or address, was not part of the Target data compromise. However, it’s always a good idea to check your credit report regularly to ensure information is correct.

    Banking products provided by USAA Federal Savings Bank, an equal housing lender. Credit cards provided by USAA Savings Bank. Both Banks Member FDIC.

  14. 14.

    Bill Arnold

    December 23, 2013 at 9:45 am

    @satby:

    Now my challenge is to convince my 30 y/o son he should enroll. He’s been without it almost all his adult life so it’s a hard sell. He doesn’t make that much and just is resistant to even looking.

    Does your son think that you’ll pick up his bills as a parent if he gets into serious expensive medical trouble, e.g. an accident?
    (Have you asked this question?)
    I’m dealing with a similar situation. Thinking it might best solved by my stepson getting married and joining his wife’s plan (girlfriend works for the VA.) (He has been without insurance since about 2009.)

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