Sic Transit The Individual Mandate

Doing a rare Thursday night dump, the Obama administration announced that the individual mandate for some is no longer operative and catastrophic plans, heretofore referred to as “junk insurance”, should be made available to those who choose that course. The lucky few, at least for now, are those whose insurance has been cancelled. Ezra Klein, no less, explains the Kafkaesque logic applied here.

1. 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 age 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 Sebelius’s full letter here. HHS’s formal guidance is here.

Klein offers some further perspective on the illogic of the new regulations. For instance:

6. But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8% of their income. The Obama administration is erasing that threshold for people whose insurance has been canceled. If they decide insurance costing 5% of their income is too expensive, then they can simply opt out. But if someone who’s currently uninsured decides 5% of their income is more than they can pay, then they have to pay the individual mandate’s penalty. What’s the logic in that?

7. The same goes for the cheap catastrophic plans sold to customers under age 30 in the exchanges. A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. The Obama administration argues that they’re just giving a bit of extra help to people who lost what they already had. But why don’t people who couldn’t afford a plan in the first place deserve the same kind of help?

I recommend his entire post.

I think that we’ll probably find out in short order that the panic inherent in this latest move merely reflects an attempt to do anything to avoid the catastrophe they can’t abide. Specifically, more uninsured after January 1st than existed before the advent of this disaster. They know the real enrollment numbers they’re not turning over to anyone else and they have to be awful to inspire this Rube Goldberg fix. Panic, however, rarely results in intelligent action, rather it simply delays an imminent reckoning.

If you like, shed a tear for the insurance companies who opted for nationalization in exchange for dreams of millions of captive customers. Tonight they’re faced with the disintegration of their carefully (imaginary?) risk pools, not to mention the unenviable task of offering, possibly creating, insurance products which will afford unanticipated coverage for an untold number of people within two weeks. Just how good does this administration imagine the private sector is?

It’s not hard to imagine this as the beginning of the end for the individual mandate. Since the Supreme Court defined the mandate as a tax, and since taxes can’t be constitutionally levied in a discriminatory manner, the exemption is certain to be subject to legal challenge. More to the point, politically anointing winners and losers in this manner is a non-starter. The fate of the mandate and perhaps even the law itself rests with the resolve of Congressional Democrats. The resolve to preserve the mandate under these new circumstances will certainly be tested and most likely found lacking. The resolve to preserve the rest of the law is going to be sorely tested. With this latest move, the President has put them in a precarious position and placed his entire project in real jeopardy.

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