In another attempt to fix (or at least minimize) the problems that have been associated with the rollout of the Affordable Care Act, the Obama administration has made yet another modification to the already-revised health care laws.
This time, the administration decrees that people whose policies were canceled by their current carrier will now be able to purchase a “catastrophic coverage” health plan instead of purchasing an ACA-qualified plan. Catastrophic policyholders who were previously dropped from their health plans will also be exempt from the tax penalty for not having coverage because of a hardship in immediately buying an Obamacare plan.
According to the law, exemptions are available to those 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.”
Health and Human Services has announced that people whose policies were cancelled and are now expected to sign up for Obamacare are just the demographic this exemption is meant to protect.
The reason for this decision is no more than an effort to continue to placate health consumers who are finding Affordable Care Act health plans less than easy to buy—whether the difficulty comes from continual problems with the insurance exchange websites, or the inability to afford the plans offered.
The Catastrophic Plan Won’t Really Help
You might think that by going with the Catastrophic option you will be saving money compared to an ACA-compliant health. While it may save a few dollars, the cost for a Catastrophic plan is unfortunately not much less than that of the least expensive Bronze health plan. However, the coverage is more limited, and the out-of-pocket expenses you will have to pay for more routine medical care in most cases will far outweigh the few dollars per month you will save.
You also won’t be able to get a premium tax credit to help pay for a Catastrophic plan. Instead, you should consider a Bronze health plan with which you may qualify for a subsidy to help absorb the cost. With a Catastrophic plan, you are fully responsible for the entire premium amount!
Exemption from a Tax Penalty—That Helps a Lot!
The tax penalty for not having health insurance in 2014 will be 1 percent of your household income or $95, whichever is higher. So someone earning $100,000 would owe $1,000 for not getting covered properly. Now those who had coverage canceled in 2013 are exempt from this tax penalty.
Exemption from the penalty opens up other options not available to everyone. If you are in good health, you may want to consider getting a short-term plan instead of an ACA-approved plan. A short-term plan is available for up to six or 12 months, depending on the state you live in.
These plans are much less expensive than ACA-approved plans. Whenever your short-term plan ends, you’ll have a special enrollment period in which you can sign up for a permanent plan. Or you may choose to apply for another short-term plan.
Another Desperate Attempt to Keep the Law on Track
It is almost shocking that the White House would be exempting people from the core aspect of the legislation—the individual mandate. I believe it indicates a panic that the entire program is falling apart. There is now a good chance that more people will be uninsured in 2014 than were uninsured in 2013. Stop-gap measures to keep the ACA from going off the rails are sure to continue.
The problem for consumers is that they are being led to believe that purchasing a Catastrophic coverage plan is going to be a better deal for them than paying a few dollars a month more for a more comprehensive ACA-compliant health plan.
By making health care reform even more confusing to health consumers, the Obama administration is creating even more instability in the insurance marketplace. As consumers are given the option of choosing different, non-ACA-qualified coverage, insurers may find themselves having to raise the rates even more for those who are choosing a plan that contains the required coverage.
Overall, it seems like President Obama is desperately trying to salvage what is left of his health care reform laws. So far, he has made so many changes to the surface problems (such as extending deadlines and offering non-ACA plans) that the Affordable Care Act no longer comes even close to resembling the one he signed into law.
Unfortunately, the underlying issue is that this is a poorly conceived law, and Americans are paying the price for it—both figuratively and literally.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.