Expanded Hardship Exemption A Result of Rocky PPACA Rollout

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December 31st, 2013

Hardship Exemption PPACACome January 1st, insurers will begin providing coverage purchased through the PPACA’s Health Insurance Exchange. It seems like a simple task. However, it has been complicated by numerous delays and changes to key deadlines and mandates that uphold the Healthcare Law.

December alone saw the introduction of a Hardship Exemption for individuals with canceled health plans, delays in enrollment deadlines, and the announcement of an extension to pay your first months premiums. While the federal government has implemented these changes to accommodate the demands of the public, there has been little consideration with regards to how it may affect insurers.

By looking deeper into the changes that have been made to the PPACA’s fundamental provisions, we can see just how big of a scramble it will be for insurers over the next coming months.

When almost 6 million Americans discovered their current health insurance plans were set to be cancelled due to their failure to meet the requirements of the PPACA, frenzy exploded. The current administration has now moved to correct their lack of foresight in a manner that could jeopardize the state of the insurance industry.

By expanding the existing Hardship Exemption, those whose plans were cancelled are exempt from the individual mandate – a key provision in the healthcare reform process. Those individuals are now eligible to purchase special catastrophic policies through state run exchanges without being penalized.

To be eligible for the new Hardship Exemption, you must be a holder of a cancelled individual policy and fill out a form indicating that all alternatives to the cancelled policy other than the special catastrophic policies are too expensive. Individuals must also provide copies of the cancellation letter they received from their insurer.

How will the Hardship Exemption affect insurers and the insurance industry?

As January 1st approaches – the date in which coverage begins under the new PPACA regulated plans – insurers are worried that less people will be insured then they currently are. To make matters worse, the average state will see premiums increase by an alarming 41% in the individual market.

Many insurers are worried that their financial predictions for 2014 – which they used to forecast premium prices, deductibles and risk corridors, - will now be offset by the changes implemented by the federal government.  The new exemption will encourage individuals to take advantage of the catastrophic plans and unbalance the risk pools used to determine prices. As a result, spending per enrollee could rise, forcing insurers to loose money on the policies offered through the state and federal exchanges.

Karen Ignani, President of the American Health Insurance Plans association, spoke on the matter stating, “The latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers.”

If the PPACA looses the support of the nations insurance providers, how can it maintain the support of the individuals seeking coverage and the providers administering the care? Its rollout has definitely been bumpy, but the effects of a poor product rollout are often felt after the product hits the shelves. As for now, insurers, individuals, and providers should brace themselves for further challenges throughout 2014.

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