UPDATE: Arizona: Michael Cannon claims low-income uninsured Pinal County residents DO have to pay the mandate penalty. Huh?
Over at the National Review, Michael "King v. Burwell" Cannon of the CATO Institute and self-described Obamacare-slayer has penned a piece which tears into the ACA over the situation in Pinal County, Arizona, where, barring a last-minute development, several thousand residents are about to find themselves in a pretty unpleasant situation when it comes to finding a new healthcare policy for 2017. As I noted last week:
Pinal County won’t have a company offering marketplace health insurance plans next year following the nation’s third-largest health insurer’s decision to exit public exchanges in all but four states.
Aetna was the only insurer planning to offer Affordable Care Act plans in Pinal County for 2017. It currently only sells in Maricopa County but had planned to expand to Pinal County.
Blue Cross Blue Shield of Arizona and UnitedHealthcare currently cover about 8,500 people in Pinal County. But United is pulling out of Arizona and Blue Cross is not offering plans there next year.
...None of this is to try and minimize the seriousness of the situation in Pinal; in addition to those 6,400 people, there are likely an equal number in the county who aren't enrolled in subsidized exchange accounts who could be...if there was an option to do so.
It sounds like the Arizona DOI is involved in serious discussions with Blue Cross, hoping to convince them to jump back onto Pinal County's exchange next year after all. For the moment, that sounds like the best short-term solution to the issue.
If not, the only option for those people appears to be full-priced Blue Cross plans and a single full-price Bronze Cigna plan.
The estimate about just how many people will be impacted ranges from as low as my 6,400 (which assumes some standard attrition by current enrollees between now and December anyway) and the 10,000 figure cited by Cannon in his piece (
which he got from...I have no idea where, actually). The point is that the number is somewhere in the high 4 figures.
UPDATE: OK, Cannon's number came from a Politico article which gave the number as "around 9,700". The actual number is 9,667 exchange-based QHP selections as of 2/01/16. However, only 8,521 of these (88.1%) were receiving APTC assistance, and Arizona's statewide effectuated enrollment dropped by about 12% through 3/31/16, so the APTC enrollees in Pinal County were likely down to 7,500 by then. This has likely dropped further to date, to perhaps 7,200, and again, will likely have further attrition, to around 6,400 by the end of this year regardless of whether there are plans available on the exchange this November or not.
Remember, these people are currently enrolled in subsidized exchange-based QHPs, which means that their income is below 400% of the Federal Poverty Level (and in most cases is likely well below it...likely 250% of FPL or lower).
Getting back to Cannon's NRO article, there was one part which puzzled me a bit:
So 10,000 residents of Pinal County now have to find coverage for 2017 outside of the exchange — still at Obamacare prices, but without the benefit of subsidies that are only available through exchanges.
And Obamacare will still penalize those residents if they don’t buy coverage — even if the amount they must pay increases tenfold or more. Though they can no longer access the subsidies that made Obamacare coverage affordable, the fact that they are still technically eligible for subsidies means that, by law, coverage is still affordable for them and they must buy it or pay the penalty.
This flies in the face of everything I know about the ACA's individual mandate provision (officially, the "Shared Responsibility Penalty").
I pointed out that most, or possibly all, of the Pinal County residents in question would likely qualify for an exemption:
@mfcannon if no compliant plans are available for under 8.05% (I believe) of household income, they don't have to pay mandate penalty.
— (((Charles Gaba))) (@charles_gaba) August 31, 2016
...to which he responded:
That’s not what the law says. But I know how much you care about that. https://t.co/qZ7NMkuyHL
— Michael F. Cannon (@mfcannon) August 31, 2016
Huh. OK...I decided to double-check just to be sure. Here's the relevant portion, directly from HealthCare.Gov:
Most people must have qualifying health coverage or pay a fee for the months they don’t have insurance. But if you qualify for a health coverage exemption you don’t need to have health insurance or pay the fee.
- The lowest-priced coverage available to you, through either a Marketplace or job-based plan, would cost more than 8.13% of your household income. Get forms and details for the Marketplace affordability exemption or the job-based affordability exemption.
- You don’t have to file a tax return because your income is below the level that requires you to file. Learn more about claiming this exemption if your income is below the tax filing threshold.
...and when you continue through to the "affordability exemption screener", you see this:
If the lowest cost Bronze level Marketplace plan available to you in 2016 costs more than 8.13% of your annual household income, you may qualify for a health coverage exemption.
This means you don’t have to pay the penalty for being uncovered for the months coverage was unaffordable.
What you need to know
- Coverage is considered to be unaffordable if the lowest cost Bronze-level plan available to you through the Marketplace in 2016 is more than 8.13% of your household income.
- The total cost to you must be more than 8.13%, including any premium tax credit you would qualify for if you enrolled in that plan.
- If you qualify for this exemption, it may apply to everybody on your tax return who doesn’t have coverage in 2016.
OK, so I was slighly off on the exact percentage; it's 8.13% of your income, not 8.05%. Fair enough...but somehow I don't think Cannon was quibbling about the exact hundredth of a percentage point.
In the case of Pinal County, Arizona, assuming there really isn't a single carrier offering policies on the ACA exchange this fall, then there would by definition be no conceivable way that any plans, Bronze or otherwise, would be available for less than 8.13% of anyone's household income...with or without subsidies.
The other possibility is that some of these folks have some sort of standing low-cost employer-sponsored insurance policy offer available to them which they've taken a pass on for whatever reason...but in that case, they're not supposed to qualify for ACA subsidies anyway.
There's one of two things going on here: Either Cannon is claiming that I'm misinterpreting the exemption rules as posted by the HHS Dept....or he's claiming that the HHS Dept. itself is misinterpreting or ignoring the relevant portion of the actual wording of the Affordable Care Act itself. It's also conceivable that that single Bronze plan available off-exchange from Cigna would just barely squeak in under the 8.13% threshold for most of these folks even at full price.
Given his involvement in the infamous King v. Burwell case (which he snarkily references in his tweet above, of course), I'm going with door #2.
I've asked him to clarify his claim, and will post an update as soon as I hear back from him.
UPDATE: OK, judging from joe's comment below, it sounds like this is Cannon's argument:
"The ACA doesn't say that you qualify for an exemption if there isn't a Bronze plan available for less than 8.13% of your income; it says that you only qualify if the lowest-cost Bronze plan is over 8.13% of your income."
"Since technically speaking, the lowest-cost Bronze plan on the exchange doesn't cost "more than" 8.13% of anyone's income...seeing how there aren't any plans on the exchange at all...it therefore follows that there's no possibly way for anyone to claim an exmeption based on plan affordability."
At least, I think that's what he's trying to say.
If so, this strikes me as being the thinnest technical, semantic argument since...well, since King v. Burwell's "established by the state" brouhaha, to be honest.
UPDATE 9/05/16: Yup, sure enough, that's pretty much exactly the argument that Cannon's trying to make...and he's pushing it hard:
You can’t do that calculation in Pinal County. The premium for the lowest-cost bronze plan in Pinal County is not $0.00. It’s not even a number. It’s the empty set. The “credit allowable under section 36B” is likewise the empty set. Section 36B “allow[s] as a credit…an amount equal to the premium assistance credit amount for the taxpayer.” To calculate the premium-assistance credit amount, you need to know either the premium for the health plan the taxpayer “enrolled in through an Exchange established by the State under [section] 1311,” or the premium for the “the second lowest cost silver plan” available to the taxpayer “through the same Exchange.” It would be awesome if all those premiums were $0.00. (Free health care!) But it’s not. Instead, no such premiums exist. Since there are no such premiums, there is no “required contribution.” Since there is no “required contribution,” there is no unaffordability exemption in Pinal County. Where there are no Exchange plans, there is no unaffordability exemption from the individual mandate.
I pointed out to Cannon that, for starters, his figure of 10,000 people is quite simply way too high; the actual number of people who will actually be enrolled in exchange policies in Pinal County who are also receiving APTC assistance by the time December rolls around is likely going to be closer to 6,400, although that's speculative. The number is absolutely not going to be any higher than 8,500 in any event. This, however is a quibble; as I noted above, we're still talking about somewhere in the high 4 digits.
The larger problem with his logic has already been explained in great detail in the comments on this very blog post, by folks like "secret advocate" among others:
Cannon is just wrong about this. The applicable statutes are as clear as the proverbial crystal.
The statute that imposes the penalty for not having health care coverage is 26 U.S.C. § 5000A. Paragraph (e)(5) of the statute grants an exemption from the penalty to "[a]ny applicable individual who for any month is determined by the Secretary of Health and Human Services under section 1311(d)(4)(H) [of the Affordable Care Act] to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan."
Section 1311 of the ACA, in turn, is codified at 42 U.S.C. § 18031. Subparagraph (d)(4)(H) of § 18031 (to which 26 U.S.C. § 5000A(e)(5) refers) requires an Exchange to issue a certificate of exemption from the penalty to an individual if "there is no affordable qualified health plan available through the Exchange, or the individual’s employer, covering the individual."
In Pinal County, there are no affordable qualified health plans available through the Exchange (which, for Arizona, is the federal exchange) that could cover residents of the county. Indeed, there are no qualified health plans at all ("affordable" or otherwise) available through the Exchange. Thus, Pinal County residents are entitled to the exemption.
The presence of the adjective "affordable" in § 18031(d)(4)(H) does not change the result. The argument seems to be made that the hardship exemption only applies if (1) there are in fact qualified health plans available, but (2) with respect to a particular individual, none of them is "affordable."
But that is not an ordinary, plain English reading of the statute. If I say, "There are no red cars in the parking lot," and there are in fact no cars at all in the parking lot, then my statement that there are no red cars in the parking lot is true.
To track the language of 42 U.S.C. § 18031(d)(4)(H), "there is no affordable qualified health plan available through the Exchange" that would cover residents of Pinal County. They get the exemption.
It is unimaginable that the Treasury Department's interpretation of the statute would be rejected by the courts (even assuming that Cannon could find someone with standing to challenge it).
An Internet search reveals the following six-page form from Healthcare.gov which people can use to apply for a hardship exemption:
However, as a practical matter, I would think (and I would hope) that it will not be necessary for the residents of Pinal County to fill out the form in these circumstances. Instead, if there are no health plans available for Pinal County residents on the Exchange, I hope that the Department of Health and Human Services would simply declare that residents of Pinal County are exempt from the penalty. That would be the certification of exemption for those residents within the meaning of 42 U.S.C. § 18031(d)(4)(H).
HHS would then tell the IRS of the declaration, and the IRS would program its computers so that the residents of Pinal County would not be charged the penalty.
That, I believe, would be the optimal way to handle the situation. It would be highly wasteful and inefficient to require all of the taxpayers of Pinal County to fill out and submit the form, and to require the federal bureaucrats to process those forms. Unlike other applications for hardship exemptions, the hardship exemption for residents of Pinal County in this situation is not a matter of discretion on the part of HHS. The residents would be entitled to the exemption automatically.
I also believe that a blanket declaration of a hardship exemption for all of Pinal County would be fully consistent with the letter and spirit of the applicable statutes.
Of course, I hope that this entire discussion becomes academic and the residents of Pinal County end up getting choices on the Exchange.
The funny thing is, as hard as Cannon is pushing this angle (if you check his Twitter feed, he's posted the link to it at least 16 times in the past few days, and the link to his earlier piece a similar number of times), he also notes that it's nothing more than a meaningless academic exercise than a serious legal issue towards the end of the Forbes piece itself:
The ACA gives the Secretary of Health and Human Services carte blanche to exempt anyone she pleases from the mandate penalty. All she has to do is claim they have “suffered a hardship [trying] to obtain coverage under a qualified health plan.” The people of Pinal County would certainly seem to qualify. To date, the Secretary has issued a raft of these “hardship” exemptions, none of which seem to apply to enrollees for whom coverage became unaffordable because their Exchange just plain collapsed. And why would they? There’s already an unaffordability exemption written into the law, right? Since the Secretary hasn’t created such a hardship exemption yet, what I’m describing is here the law.
He even flat-out admits this via Twitter:
— Michael F. Cannon (@mfcannon) September 1, 2016
— (((Charles Gaba))) (@charles_gaba) September 1, 2016
— Michael F. Cannon (@mfcannon) September 1, 2016
I assume from this that he does not plan on attempting to take this all the way to the U.S. Supreme Court, so I guess there's that. Sheesh.