A Rocky Rollout for the Individual Mandate

It should be news to no one that the implementation of the Affordable Care Act (“ACA”) requirement that individuals without employer sponsored health insurance must be covered by minimum essential coverage (the individual mandate) has been anything but seamless.  Both federal and state health insurance exchanges have experienced dramatic crashes that have severely limited the ability of individuals to evaluate and apply for online coverage.  Although improvements are reported daily, along with additional difficulties, it is clear that those responsible for the implementation of health care reform are well into Plan B, which includes increased reliance on in-person and written applications for coverage.

Even as enrollment numbers improve, other hurdles loom ahead. Will insurers receive the information needed to enroll a successful applicant into the correct coverage option? Will the system of subsidies and credits be properly applied to the individual’s premium? Will sufficient numbers of younger, and presumably healthier, individuals sign up for coverage so that their premiums will help offset the higher costs of covering older or less healthy individuals, who are eagerly taking advantage of the opportunity to obtain coverage that might not previously have been available.

As a result of this muddled rollout, the deadlines facing those without employer-sponsored coverage have been softened. Originally, such individuals had to sign up for coverage by March 31, 2014. No penalty would be assessed so long as an individual did not have coverage for three consecutive post-2013 months. In other words, an individual who lost employer sponsored coverage had three months within which to find coverage under another employer’s plan or sign up through an exchange. An individual without employer sponsored coverage on January 1, 2014, who signed up for coverage that did not go into effect until after March 2014, would face a penalty for exceeding this short coverage gap exception.

More recent HHS guidance changes this rule. Now, no penalty will be assessed if the individual just signs up for individual coverage by March 31, 2014, even if the individual did not have coverage for January, February, and March 2014.  Remember, however, signing up for coverage by the March 31, 2014 deadline does not mean that the coverage itself is retroactive.  If the individual decides to wait until March to sign up for coverage but then incurs medical expenses in January or February 2014, those medical expenses will not be insured. They will remain the individual’s responsibility.