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90% will qualify for individual mandate exemption

Originally posted August 7, 2014 by Dan Cook on https://www.benefitspro.com

There are now so many exemptions to PPACA’s individual mandate that the CBO says the number who would face fines for lack of coverage has dropped from seven million to four million.

That means that almost 90 percent of the nation’s uninsured population would not have to pay a penalty under PPACA in 2016, according to a report from the Congressional Budget Office and the Joint Committee on Taxation.

Though it’s good news for those who decide not to seek health insurance coverage as required by the law, it’s bad news for the insurance industry, which was to receive revenue from the fines. Instead of collecting $7 billion, the CBO now estimates $4 billion will be assessed.

The new numbers are posted on the CBO website.

As PPACA has been tossed back and forth between the legal and the political arenas, the number of exemptions has grown rapidly. The CBO lists the following major categories:

  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
  • People with income low enough that they are not required to file an income tax return;
  • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in PPACA;
  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time);
  • People who are incarcerated or are members of Indian tribes. (CBO doesn’t explain why these two constitute a single bullet point).

According to the Wall Street Journal, the Obama administration in December 2013 expanded the number of exemptions to include 14 ways residents can file for an exemption based on hardships, including domestic violence or a recent death of a family member.

The upshot is that about nine in 10 of those who will choose not to purchase insurance won’t have to pay the fine, which is $95 for an adult or 1 percent of an individual’s taxable income, whichever is higher. Currently, penalties are set to increase to $325, or 2 percent, in 2015, and $695, or 2.5 percent, in 2016.

Based on these latest numbers, CBO said, “An estimated $4 billion will be collected from those who are uninsured in 2016, and, on average, an estimated $5 billion will be collected per year over the 2017–2024 period. Those estimates differ from projections … made in September 2012, when the agencies last published such estimates. About 2 million fewer people are now projected to pay the penalty for being uninsured in 2016, and collections are now expected to be about $3 billion less for that year.”

The fallout from these increasing exemptions will probably fall on those who actually have coverage. Carriers had based projected premium rates in part on the revenue from the fines assessed against those who shunned coverage. With that money dwindling, carriers have said they’ll have to raise premiums for those with coverage.