Tag Archives: hardship exemption

Best laid plans

So, we have come to this at last. The new section of the PPACA we are looking into is Subtitle F – Shared Responsibility for Health Care. Part I addresses individual responsibility. Specifically, the responsibility to maintain a minimum essential coverage of insurance, section 1501.

Section 1501 starts out with a long discussion of why insurance is interstate commerce, talking about how expensive it is, and how this will insure almost all Americans. It notes that in Massachusetts, this same type of requirement actually increased the number of employers who offered employer-based coverage. It doesn’t mention who was governor when that happened – anyone remember? It talks about the economic impact of disease and shortened lifespan, the cost of providing care to those without coverage, and reminds us that the Supreme
Court already said that insurance was subject to regulation under the interstate commerce class.

All of that was, of course, intended to be part of the argument before the Supreme Court (because, again of course, this issue would appear before the Court) that this Act was constitutional because of the interstate commerce clause. Which the Supreme Court promptly said “NOPE” to when it made it there before it was even fully enacted. However, you shouldn’t fear – because Congress chose the IRS to be the people in charge of handling all of the penalties for not following the mandate, the Act, or at least most of it, was declared constitutional under the seemingly endless power of the Federal government to tax and spend. Which, if you think about it, is all they are really supposed to do.

What does the Individual
Mandate actually do? Well, it amends the Tax Code, specifically section 5000A, to say that every person, in every month starting January 1, 2014, has to maintain minimum essential coverage for their health expenditures. If they don’t, they are subject to a penalty on their tax return. I guess this means we get to learn new tax forms. Oh boy. The penalty is either calculated by a formula given in this section, or by the amount they would have had to pay for bronze level coverage (remember the colors!) in an Exchange, whichever is LOWER.

The penalty formula is per month, per person, and can be a flat dollar amount or percentage of income, whichever is GREATER. The flat dollar amount is $695, although there is a phase in period where it is $95 in 2014, and $325 in 2015. The flat amount is capped at 300% of total dollar amount, and is subject to cost-of-living increases. The percentage of income is also phased in – 1% in 2014, 2% in 2015, and 2.5% thereafter.

Let’s do an example.

Assume you are the sole income, and you make $50,000 a year, with 2 adults and 2 kids. If you didn’t have any insurance, then the most you would be required to pay, in 2016, would be $2085. If there were a plan that insured you for less, then you would be charged that amount, instead. But then, if there were a plan that would cover you for that – why didn’t you buy it?

Exemptions:

This doesn’t apply at all to people that are members of a recognized religious sect; a member of a health care sharing ministry (remember those?); the Not Lawfully Present (you know who you are); and people in jail. It also doesn’t apply if you can’t afford coverage, which is defined as being charged more than 8% of your income per month (also alterable with changing conditions) for health insurance, whether offered through an employer, or through the Exchange (after accounting for the credit); people who make so little they don’t have to file taxes at all; members of Indian tribes; any month where you weren’t covered, but the total number of months you weren’t covered was less than 3 consecutive (think changing jobs); or anyone who gets a hardship exemption through HHS.

Minimum Essential Coverage is defined as: Medicare, Medicaid, CHIP, TRICARE, the VA, Peace Corps health insurance, eligible employer-sponsored plans, individual plans, grandfathered plans, and other plans, such as the plan of being outside the US (no really – that counts!). So – that’s a lot of plans.

They can’t criminally charge you for not paying the penalty, and they can’t take your property either. I suppose they will write you sternly worded letters.

I haven’t yet noted that we are now required to purchase broccoli. I always wondered – do they mean we have to consume it too, when we are required to purchase it, or just buy it? Clarity, people, clarity.

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Can I, Can I?

We’ve talked a bunch about the Exchanges, or the place where you go to buy health insurance if you can’t, or choose not, to buy it from your employer. However, there are rules governing who is actually allowed to purchase insurance on these Exchanges. There are also guidelines for who can receive premium assistance, whose employer based insurance in unaffordable, and who is exempt from tax penalty if they don’t have insurance.

Most of these requirements were laid out in previous sections, but the next 6 sections, including this one, 1411, explicitly state that the Secretary of Health and Human Services has to come up with a program to assess the eligibility of people for these various items. So, yes, they said previously that you have to meet these requirements, and now they are saying that the government has to make sure they determine whether you meet these requirements. I suppose that is better than the alternatives – either saying you have to do something and then not caring if you do it, or worse, making requirements that you have no possible way to prove you meet. That last one sounds like something the Vogons would do.

So the Secretary of HHS has to make this program. Then what? You have to give them information, name, date of birth, SSN, etc. If you are claiming a tax credit because your employer doesn’t provide minimum coverage, then you have to include a lot of details about your employment status, and the cost of the coverage, and the cost-sharing. I hope there is a form. I’m sure there will be a form. J

The thing you really need to understand about the PPACA is that is references a lot of other sections of the PPACA and many other laws. For instance, if you wanted to claim an exemption from having to hold insurance, which is allowed in section 1311, subpart d, subsubpart 4, subsubsubpart H, in order to be exempt from the tax penalty as laid out in section 5000A of the tax code, then section 1411 tells you how to do that.

Just as aside, this is the first mention of WHO might be eligible for such an exemption. These include religious exemptions, people who are members of health care sharing ministries (oh, you’ve never heard of those – well – are you in for a treat! See the footnote.), Indian, or eligible for a hardship exemption.

There are then pages, and pages, and pages about exactly how the Secretary can develop this system, what happens if there are problems, liability for false information, confidentiality of information….and so on for six pages. We’ll assume that the Secretary has read them too.

Remember – there are 5 more sections about eligibility. We’ll finish those out this week.

Footnote: A Health Care Sharing Ministry is a group of people who pay money into the system, and then when they need health care services, they receive money from the pool, after meeting some basic level of out-of-pocket expense. They are typically not-for-profit. They are faith-based, being predominately Christian, and usually expect their members to live a “Christian lifestyle”. The members have no guarantee of payment. But they aren’t health insurance. No siree-Bob. Even though Washington State shut one such organization down, for not registering as an insurer.

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