Loopholes Excuse Most Uninsured from Affordable Care Act Mandate

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medical_billing_advocate-129According to what we thought we knew about the Affordable Care Act’s individual mandate, those who are uninsured must purchase health insurance or face a tax penalty. The Affordable Care Act itself offers subsidy assistance for those with incomes between 100 and 400% of the Federal Poverty Level (FPL) in efforts to get consumers insured and avoid this penalty.

This year the amount of the tax penalty will be either $95 or 1% of the person’s income – whichever is greater. Next year, the tax will increase to $325 or 2%, and in 2016 it will further increase to $695 or 2.5% respectively.

Critics have not held their tongue regarding the individual mandate, calling it unconstitutional.  A few exemptions were initially written into the law for those whose situation prevented them from enrolling in a healthcare plan, but these circumstances were previously thought of as exceptions to the rule.

Anyone who fit the bill for these workarounds would be exempt from the mandate. These exemptions included those who fall into the Medicaid coverage gap, Native American exemptions and religious beliefs.

What we’re seeing now, though, is a growing list of exemptions – some highly controversial. The individual mandate has lost some of its original bite, and now, according to the Congressional Budget Office (CBO), most people without insurance won’t have to comply.

CBO and Joint Committee on Taxation reported that, of the 30 million uninsured people in the country, about 27 million will not be held to the mandate, because they fall under one of the expanded exemption umbrellas.



The number of people exempt from the law has spiked in part because of states not expanding Medicaid, resulting in a number of people falling into the coverage gap. This is further exacerbated by a recent legal battle over whether or not the Affordable Care Act was written to allow consumers to receive subsidies in states that did not operate their own healthcare exchange. The administration lost the case and has since asked for the decision to be overturned.

medical_billing_advocate-99Undocumented immigrants are also exempt from the mandate. According to Kaiser Health News, undocumented immigrants in California account for 24 percent of the uninsured population. The Commonwealth Fund reported that California has about a quarter of the nation’s undocumented immigrants. This statistic gives a good idea of just how many people qualify as an exception under this one exemption.

If a person’s income is so low that they do not need to file a tax return, or if the only healthcare plans available to them would cost over eight percent of their income, they would also be eligible to apply for the exemption. 

Victims of domestic violence can be exempt from the individual mandate. Critics of Obamacare cite this as ridiculous and claim it has nothing to do with whether or not they can afford healthcare, and some believe that it may mean they need healthcare even more. Victims are not required to offer proof of the domestic violence; they need only claim that they have experienced it recently.

If a person has been evicted or foreclosed on their home, or they are facing eviction or foreclosure, the administration has given them the opportunity to apply for the exemption and avoid the tax. Furthermore, if a person was homeless at any time in the past year, they are also exempt.

Also, if a person is incarcerated or being held on pending charges, they may qualify for an exemption. If they are taking care of a disabled, ill or elderly family member or if a family member passes away, they may also qualify.

The list of exemptions goes on further to include those who have had property damage caused by a natural disaster, people who have had problems registering on the website, those who received a shut-off notice from their utility company and anyone who is a member of a healthcare sharing ministry.



As made clear by the long list of possible exemptions, one may be hard pressed to find someone who doesn’t qualify for one. Worries are plaguing insurance companies, because a flimsier mandate means fewer people have to enroll, and if fewer people buy insurance, the risk pool weakens.

Healthy young people seem to be a big part of those who can claim exemption from the mandate. Some fear this could drive up costs once again, causing the older and less-healthy population to have to foot more of the bill.

A representative of Blue Cross and Blue Shield of North Carolina confirmed that more sick and elderly people enrolled during the first period than anticipated. In a program that relies upon the young and healthy enrolling, this can be disastrous. The representative also said that strengthening the mandate, and increasing penalties would help the risk pools. One recommendation was to make insurance more affordable for the young and healthy individuals.

Those that were already against Obamacare and the individual mandate are wondering what the point of the law is if most of the people targeted are going to be exempt from it anyway. Furthermore, critics already opposed to the mandate ask why the administration doesn’t just move to waive the mandate altogether since it seems so easy to dodge anyway.

Douglas Holtz-Eakin, former CBO director, remarked, “If your pajamas don’t fit well, you don’t need health insurance.” He went on to say that the exemption increase “basically waives the individual mandate.”

Douglas Holtz-Eakin, former CBO director, remarked, “If your pajamas don’t fit well, you don’t need health insurance.” He went on to say that the exemption increase “basically waives the individual mandate.”

Critics also say that some of the exemptions are quite possibly illegal and that because of this growing list, the number of uninsured individuals will not be much different than it was before the implementation of Obamacare, citing the entire system as a failure.



medical-advocacy_162136106Supporters claim that it is not the intention of the law to force those who can’t afford insurance to buy it anyway, which is what many assume the individual mandate is all about. They say the reason behind the plethora of exemptions is to help those who do not fall neatly into the categories set out by the ACA.

The exemptions simply supply relief to those who can’t afford it or are going through some type of hardship. Those who can afford to buy health insurance, in their opinion, should do so in order to cover themselves and avoid their healthcare bills being passed on to other consumers.

Furthermore, supporters say that even though so many consumers qualify for exemptions, that number is not indicative of how many will actually use them. Most people want health insurance coverage, and due to the Affordable Care Act and subsidy programs, more people can enroll in a plan and actually afford to pay for it.

Because of this, many who have the green light to request an exemption are likely to go ahead and enroll in a healthcare plan that fits their budget, and when they do, the estimated numbers may fall closer to where CBO originally predicted rather than fall to their downgraded estimate.

CBO said the increase in options for exemption from the individual mandate “is attributable in part to regulations issued since September 2012 by the Departments of Health and Human Services and the Treasury and in part to technical updates and changes in the economic outlook.”

Arguments from both sides have their own level of merit, but only time will tell what effects this myriad of exemptions for the individual mandate will have on consumers as well as the Affordable Care Act as a whole.


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