CBO: 90% of Uninsured Will Qualify for Individual Mandate Exemptions

Nearly 90% of the 30 million U.S. residents who are uninsured will not have to pay a penalty under the Affordable Care Act's individual mandate in 2016 because of a growing list of exemptions, according to a report from the Congressional Budget Office and the Joint Committee on Taxation, the Wall Street Journal reports (Armour, Wall Street Journal, 8/6).

Background

Under the ACA's individual mandate, most U.S. residents are required to purchase individual coverage beginning this year or risk penalties of $95 for an adult or 1% of an individual's taxable income, whichever is higher. The penalties will increase to $325 or 2% in 2015 and $695 or 2.5% in 2016 (California Healthline, 7/25).

The Obama administration originally provided a limited number of exemptions to the mandate under the law, including those for Native American tribes, illegal immigrants and certain religious groups. The administration in December 2013 expanded the number of exemptions to include 14 ways U.S. residents can file for an exemption based on hardships, such as domestic violence, a recent death of a family member or for people who "experienced another hardship obtaining health insurance" (Wall Street Journal, 8/6).

Report Details

CBO said the additional exemptions have lowered the total number of people who can be fined in 2016 under the law's individual mandate from six million to four million (Chumley, Washington Times, 8/7). Overall, about 23 million U.S. residents will be exempt, and the government will only collect about $4 billion in fines, down from an estimated $7 billion, according to CBO (Wall Street Journal, 8/6).

According to the Journal, the overall number of exempted individuals also has increased because of states that opted not to expand Medicaid under the ACA, meaning many low-income residents of those states will be ineligible for Medicaid coverage and might be exempt from the mandate.

In addition, the number of exempted individuals could expand further depending on the outcome of a legal dispute as to whether the federal government is permitted to offer subsidies to ACA enrollees using federally operated exchanges. About four million U.S. residents receive subsidies through federal exchanges in 36 states, and those people might be eligible for exemptions to the mandate if that subsidy coverage is removed, because coverage might then become unaffordable.

Insurer Concerns

According to the Journal, insurers are concerned that the increasing number of exemptions will increase premiums by making it easier for younger, healthier people to avoid purchasing coverage. Patrick Getzen, vice president and chief actuary at Blue Cross Blue Shield of North Carolina, said, "With a stronger penalty and less broad exemptions, that would be better for the risk pool."

Karen Ignagni, president and CEO of America's Health Insurance Plans, said, "To make these new reforms work, there needs to be broad participation in the system" (Wall Street Journal, 7/6).