As part of my continuing series highlighting many design problems with the Affordable Care Act, I turn to the logically incoherent structure of the hardship exemption. This is less an actual design problem and more of a moral problem.
You can be exempt from the individual mandate if “the lowest-priced coverage available to you would cost more than 8% of your household income.” Effectively, one part of the law is declaring that spending over 8 percent of your income on health insurance is an unacceptable burden. According to the law health insurance becomes unaffordable above that threshold.
Yet other parts of the law are designed to assure many need to pay above this 8 percent threshold. The exchange subsidies cut off completely at 400 percent of the federal poverty line and that will leave many who make over that amount paying more than 8 percent for even the cheapest bronze plan. The exchanges are supposed to make health care affordable for everyone but won’t according to the law’s own definition of affordability.
The mere existence of this exemption undermines the supposed point of the law. If the creators of the law believe that 8 percent is the threshold at which insurance becomes unaffordable then they shouldn’t have just provided an exemption from the mandate. Instead they should have structured a subsidy that would cap premiums so no one is required to pay above this level. Such a subsidy could have very easily been added but instead the drafters decision to making the CBO score pretty was more important that making the Affordable Care Act about affordability for everyone.
If you are actually trying to design a universal insurance law you shouldn’t have an affordability exemption that many will qualify for, you should put in place sufficient help to make such an exemption is unnecessary.
Photo by NESRI, used under Creative Commons license