"Passed out like candy at Halloween": Welcome to CMS's new "hardship" exemption threshold

2018 MIDTERM ELECTION

Time: D H M S

Way back on January 20, 2017, the very day Donald Trump was inaugurated, he issued an Executive Order which started the process of undermining the Affordable Care Act. As David Anderson of Balloon Juice succinctly put it:

yes individual mandate exemptions will be passed out like pacifiers at a rave

— David Anderson (@bjdickmayhew) January 21, 2017

section 2 is the meat. Defangs individual mandate by passing out hardship exemptions like candy on Halloween

— David Anderson (@bjdickmayhew) January 21, 2017

Of course, last December, Congressional Republican repealed the ACA Individual Mandate penalty altogether by reducing it down to $0 or 0.0% of income, but it remained in place for 2017 and is still in place for 2018 as well...which leads us to today's press release from the Centers for Medicare & Medicaid:

CMS Details Additional Process for Providing Relief for Consumers from Individual Mandate
Today’s announcement provides American consumers with the additional option to claim a hardship exemption from the individual mandate

Today, the Centers for Medicare & Medicaid Services (CMS) announced a new, more streamlined way for consumers to claim a hardship exemption from the tax penalty imposed for not maintaining health coverage for 2018 on their federal income tax returns, making it easier for taxpayers across the nation to claim their exemption.

Fair enough sp far; while the goal is to ensure that as many people have ACA-compliant healthcare coverage as possible, I have no problem with streamlining the hardship exemption process for those who are eligible to claim it. No one should have to jump through a bunch of red tape hoops whether they have to pay the penalty or they're eligible not to pay the penalty.

However, trouble starts in the very next sentence:

Of the $3 billion the Internal Revenue Service (IRS) collected from taxpayers in individual mandate penalties in 2015, over 5 million households, or nearly 80 percent, earned $50,000 a year or less.[1]

Hmmmm...actually, I believe that's a typo. According to the spreadsheets at the link, it looks to me like the only $1.7 billion in ACA mandate penalty revenue was collected in 2015 (for tax year 2014), from a total of 8.0 million households. Of that, around 6.7 million households earned less than $50,000, or around 84%.

2016 was the year in which $3.1 billion was collected from around 6.7 million households (for tax year 2015), of which indeed 79% (5.26 million) households earned less than $50,000.

For the record, in 2017 (for tax year 2016), just over $3.6 billion was collected from just 4.95 million households, with 77% (3.8 million) earning less than $50,000.

When looking at the figures for all three years, it's important to keep in mind that the ACA mandate penalty increased dramatically from $95/person (or 1.0% of income) for 2014 to $325/person (or 2.0% of income) for 2015, to $695/person or 2.5% of household income for 2016 and beyond.

I realize this doesn't change the larger point of the sentence ("See? Obamacare hurts poor people!"), but it's important to keep this stuff straight.

Of course, the vast majority of households earning less than $50,000/year are either eligible for Medicaid or heavily-subsidized ACA plans anyway, and even those who aren't (mainly those caught in the Medicaid Gap, which itself only exists due to Republican states refusing to expand the program under the ACA) are already eligible for an exemption from the mandate, so this argument seems to be a bit disingenuous.

The anti-ACA propaganda starts with the next sentence:

The individual mandate penalty is yet another example of how the ACA hurts low and middle income Americans the most, and today’s action reflects our commitment to minimize the impact of Obamacare’s failures.

REMINDER: Less than a month ago Seema Verma was praising the Democratic Governor and Democratic Legislature of New Jersey for reinstating the ACA individual mandate penalty...the very penalty she's trashing here. Gaslighting much?

Moving on...

For 2018, the Patient Protection and Affordable Care Act (PPACA) requires that all Americans get health coverage that qualifies as minimum essential coverage (MEC) or pay a penalty, commonly known as the “individual mandate.” Individuals that do not maintain enrollment in MEC or qualify for an exemption must pay a penalty. An individual may be eligible for a hardship exemption if they experience certain circumstances that prevent them from obtaining coverage, such as homelessness or experience a fire, flood, or other natural disaster.

See how many propaganda slams you can find in the following two paragraphs:

This new option to claim a hardship exemption through the federal tax filing process responds to President Trump’s first Executive Order, where he directed agencies to minimize the unwarranted economic and regulatory burdens of the PPACA. The President’s Executive Order directs agencies to exercise all authority and discretion available to them to grant exemptions from PPACA requirements that would impose a financial burden on individuals and families. Today’s announcement also follows the 2017 Tax Cuts and Jobs Act, which reduced the individual mandate penalty to $0 for months beginning on or after January 1, 2019.

“Today’s announcement shows how President Trump’s Administration is working to ease the burden of Obamacare.” said CMS Administrator Seema Verma. “Although the tax cuts signed by the President earlier this year eliminate the mandate penalty starting in 2019, Americans are still under threat of the penalty for this tax year of 2018. This guidance will simplify how consumers claim the hardship exemption from the individual mandate directly on their tax return.”

OK, so are they simply reducing the paperwork involved? Well, yes, in a manner of speaking: They're apparently just going to...not require any evidence of hardship whatsoever!

Specifically through today’s guidance, CMS is announcing additional details on how the Agency is making it easier for taxpayers to claim a hardship exemption on a federal income tax return without presenting the documentary evidence or written explanation generally required for hardship exemptions. Consumers should, of course, keep with their other tax records any documentation that demonstrates qualification for the hardship exemption. Consumers can still apply for these exemptions through the Exchange using the existing application process.

To see the guidance issued today, please go to (link)

The PDF itself doesn't really go into much more detail than this...it sounds like it's that simple: Just say "I claim a hardship" without having to provide a lick of evidence of such:

To provide additional flexibility for those in need of a hardship exemption for 2018, CMS is announcing that consumers may claim all hardship exemptions available under §155.605(d)(1) either by obtaining an ECN through the FFE using the existing application process, or on a federal income tax return without presenting the documentary evidence or written explanation generally required for hardship exemptions. Consumers should keep with their other tax records any documentation that demonstrates qualification for the hardship exemption. A description of the hardship exemptions available under §155.605(d)(1) that CMS intends to add to the list of exemptions currently described in §155.605(e) can be found here.

I'm not quite sure which of the 14 reasons listed at the last link are new this year, but the final one "Another Hardship" seems to be a pretty good catch-all for just about any excuse you can think of.

"Candy at Halloween" indeed...