Administration expands use of exemption from mandate penalty

July 10, 2012
From: Kathleen Sebelius, Secretary of Health and Human Services
To: State Governors


As you know, beginning in 2014, the Affordable Care Act provides for the expansion of Medicaid eligibility to those adults under age 65 with incomes up to 133 percent of the federal poverty level who were not previously eligible for Medicaid. The Supreme Court held that, if a state chooses not to participate in this expansion of Medicaid eligibility for low-income adults, the state may not, as a consequence, lose federal funding for its existing Medicaid program. The Court's decision did not affect other provisions of the law. For example, the decision did not change the fact that the federal government will completely pay for coverage under the eligibility expansion in 2014-2016, and for at least 90 percent of such costs thereafter, or that states have flexibility to design the benefit package for the individuals covered.

Ultimately, I am hopeful that state leaders will take advantage of the opportunity provided to insure their poorest working families with unusually generous federal resources while dramatically reducing the burden of uncompensated care on their hospitals and other health care providers. If any state were to choose not to do so, the Affordable Care Act exempts individuals who Congress determined cannot afford coverage from the individual responsibility provision. As to the very small number of affected individuals who would not quality for the statutory exemption, Congress provided additional authority, which we intend to exercise as appropriate, to establish any hardship exemption that may be needed.


By Don McCanne, MD

It is outrageous that some governors are refusing to provide coverage to low-income adults, even though the Affordable Care Act authorizes the federal government to pay most of the costs of this expansion in the Medicaid program. So what is the Obama administration doing to be sure that these individuals become insured?

Many of these low-income adults who are not yet included in the state Medicaid programs are so poor that they will qualify, under ACA, for an exemption from the "individual responsibility provision" - the penalty or "tax" that must be paid for not being insured. Thus they have the explicit right to remain uninsured without being penalized for being so.

Others are still poor, but fall above the threshold for the exemption from the individual responsibility provision. It is for this sector that the administration is taking action. They are making the generous offer to exercise their authority to provide exemptions for these additional individuals from the penalty or tax that would otherwise be assessed for not being covered by an extension of a Medicaid program that the governors refuse to authorize, or for not purchasing a plan in an insurance exchange that they can't possibly pay for even with the subsides provided (not to mention that most of these very low-income adults were presumed under ACA to be covered by Medicaid, thus the law seems to lack provisions for them to be allowed to receive subsidies for purchase of plans in the exchanges).

Wow. The most needy population is being left out and all the administration can do is to relieve them of the financial penalties they would owe for being uninsured?

To be fair, this is not simply a response of an uncaring president and his administration. They have an irreparably flawed health care financing system with which to work. But the administration should be lambasted for not just cooperating with but also for leading with the planning and implementation of such an unmerciful system.

This system is beyond repair. We need to replace it with a humane, equitable and efficient single payer national health program that would take care of the health care needs of all of us.