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Cancellations lead to exemption

As of last night, health care consumers who've received cancellation notices have important new choices. Republicans and insurers have a real problem with that.
Health and Human Services Secretary Kathleen Sebelius during a meeting at the Miami-Dade library on December 13, 2013 in Miami, Florida.
Health and Human Services Secretary Kathleen Sebelius during a meeting at the Miami-Dade library on December 13, 2013 in Miami, Florida.
When it comes to the recent firestorm over the Affordable Care Act, perhaps the only development that's generated as much attention as is the cancellation notices. This, of course, refers to the sliver of the population -- by most estimates, far less than 1% of U.S. consumers -- who lost their old plan due to changes to the individual, non-group market.
For ACA opponents, the cancellations are manna from heaven. "See?" conservatives exclaim. "Obamacare is taking Americans' health care away."
The reality is far different. For one thing, those who've received cancellation notices will now get new plans, and many of them are thrilled with the results. For another, though the right has been loath to admit it, cancellation notices were pretty common in the individual market long before the health care reform law came around.
But there's still a group of Americans who liked their old plan, aren't satisfied with their new options, and would prefer to go without insurance, but now feel stuck -- the individual mandate imposes a penalty on these folks unless they choose a coverage plan. So, last night, the Obama administration decided to give these consumers new choices: buy a bare-bones plan that ordinarily wouldn't qualify under the ACA or go without and be exempt from the mandate.

Millions of people facing the cancellation of health insurance policies will be allowed to buy catastrophic coverage and will be exempt from penalties if they go without insurance next year, the White House said Thursday night. Kathleen Sebelius, the secretary of health and human services, disclosed the sudden policy shift in a letter to Senator Mark Warner, Democrat of Virginia, and five other senators.... The Department of Health and Human Services issued a bulletin on Thursday advising consumers, "If you have been notified that your individual market policy will not be renewed, you will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage."

Note, this is the second phase of proposed efforts to help those who received cancellation notices. The first came last month, when President Obama announced a policy encouraging private insurers to leave the individual policies in place for another year, but in many states, officials and insurers balked. This in turn led to yesterday's announcement.
How big a deal is this? As is always the case when it comes to the political fight over health care, it's a subjective question -- on the one hand, we're talking about a very small fraction of a percentage of consumers, and these folks are really just in a "transition" period anyway. They'll eventually end up in a coverage plan that works for them, and this is just intended to give them a little more time to get their situation worked out.
On the other hand, this is arguably the first substantial crack in the individual-mandate wall.
In terms of the larger context, Republicans will no doubt howl -- though they're going to do that anyway -- but it's the insurance industry that's especially unhappy. "This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers," says Karen Ignani, head of the trade group America's Health Insurance Plans.
Ezra Klein added, "[Insurers] worry the White House is underestimating the number of people whose plans have been canceled and who will opt to either remain uninsured or buy catastrophic insurance rather than more comprehensive coverage."