HHS has decided people whose insurance plans have been canceled for not meeting Patient Protection and Affordable Care Act requirements qualify for an exemption from the individual mandate.
In a letter to Sen. Mark Warner (D-Va.), HHS Secretary Kathleen Sebelius wrote people whose old health plans will no longer be offered in 2014 can qualify for a "hardship exemption" from the reform law's requirement to buy insurance coverage. People whose plans have been canceled are also eligible for catastrophic coverage under the hardship exemption.
According to CMS guidance, the government must grant hardship exemptions to people who experience financial or domestic circumstances, including an unnatural or human-caused event, that prevent them from obtaining coverage through the marketplaces. Individuals for whom the expense of purchasing a qualified health plan would cause serious deprivation of food, shelter, clothing or other necessities also qualify for the hardship exemption. Some examples of circumstances that would qualify a person for the exemption include becoming homeless, recently experiencing domestic violence and recently experiencing a fire, flood or other natural or human-caused disaster.
Originally, non-grandfathered policies — plans that went into effect or underwent certain changes after the PPACA became law in March 2010 — had to meet new coverage requirements in 2014. Many insurers sent out cancellation notices to people enrolled in non-grandfathered plans, spurred Republicans to criticize President Barack Obama, saying he had failed to keep his promise that Americans could keep their old health plans if they wanted under the PPACA. Subsequently, President Obama decided to use executive action to give health plan providers the option of continuing to offer individual coverage next year that doesn't meet the reform law's requirements.
However, insurance industry members have expressed concern about his decision, saying it could lead to fewer younger and healthier people purchasing coverage through the health insurance exchanges, causing premiums to increase. HHS released regulations last month acknowledging that extending health plans that don't meet Patient Protection and Affordable Care Act requirements could lead to fewer healthy exchange enrollees and losses for health insurers.
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