Breakdowns in the rollout of the government’s health insurance exchange have fueled speculation about delaying the ACA “Individual Mandate.” This is the requirement that Americans buy health insurance in 2014 or pay a tax penalty of $95 or 1% of income, whichever is greater.

Three options are on the table to delay the individual mandate:

First, the mandate itself could be delayed for one year—much as the employer “play or pay” mandate has been delayed until 2015. Senator Joe Manchin (D-WV) advocates legislation to do just that.

While republican and some democrat lawmakers support a one-year delay, the White House opposes it, reflecting insurance industry concerns that plan pricing has been based on the mandate’s spurring millions of younger and healthier people to enroll in 2014. Read more.

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Deciphering ACA Individual Mandate Delays: Making Sense of the Options

Mon Oct 28, 2013

Breakdowns in the rollout of the government’s health insurance exchange have fueled speculation about delaying the ACA “Individual Mandate.” This is the requirement that Americans buy health insurance in 2014 or pay a tax penalty of $95 or 1% of income, whichever is greater.

Three options are on the table to delay the individual mandate:

First, the mandate itself could be delayed for one year—much as the employer “play or pay” mandate has been delayed until 2015. Senator Joe Manchin (D-WV) advocates legislation to do just that.

While republican and some democrat lawmakers support a one-year delay, the White House opposes it, reflecting insurance industry concerns that plan pricing has been based on the mandate’s spurring millions of younger and healthier people to enroll in 2014.

A second option would be to keep the mandate in place but delay for one year any penalties for not having coverage. The argument is that potential enrollees should not be penalized for website breakdowns.

In truth, however, penalties are a murky part of individual mandate enforcement. Not only is there a so-called “hardship” exemption, which gives HHS wide latitude to waive penalties, but they would not actually be imposed until tax returns are filed in 2015.

But the biggest problems with options one and two are political: a one-year delay of either the individual mandate itself or the statutory penalties would probably require legislation—a non-starter for the White House.

A third and more promising possibility for delay is in the open enrollment period, now fixed by regulation at between October 1 and March 31, 2014. In future years open enrollment will extend from October 15 until December 7.

Last week the White House clarified an apparent “disconnect” between the statutory mandate that individuals’ health coverage be effective January 1, 2014 and a regulation keeping the enrollment window open until March 31, 2014.

HHS announced that as long as people “enrolled” in health coverage by March 31 they would incur no penalty, even if coverage did not actually go into effect until after March 31. Since the system apparently needs two weeks to process applications and since coverage usually takes effect on the first day of the month, this means that health coverage might not be in place until April or May.

In clarifying the disconnect, therefore, the individual mandate itself has been delayed from January 1, 2014 until April or May 2014.

Further complicating individual mandate enforcement, of course, is that required employer reporting under IRC 6055 and 6056 has been delayed until 2015. HHS and IRS will therefore be unable to confirm employer health coverage individuals claim for 2014.

It’s possible that continuing breakdowns in the exchange website will in the end force the Administration to extend the open enrollment window past March 31, 2014. The White House has pledged to have the system fixed and fully operational no later than November 30, leaving time for individuals to apply by December 15 for coverage to take effect on January 1.

What seems most interesting about the latest developments is that while failure of the government’s website rollout has gotten all the headlines the subtext is potentially more important—the ACA individual mandate has been delayed for many, depending on when they enroll, from January 1 until as late as May 1. That should be front page news!