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HHS Creates Another Obamacare Hardship Waiver

By Jeryl Bier

A few weeks ago during a Congressional hearing, Health and Human Services Secretary Kathleen Sebelius told Congress regarding Obamacare, “We have implemented a number of changes in the way the law was written to ease the transition into the marketplace.” This week, her department has done the same thing once more, granting penalty exemptions for people who applied for Medicaid or CHIP (Children’s Health Insurance Program) coverage before March 31 but who may experience a gap in coverage before their applications are processed and approved. Guidance issued on March 31 declares that “HHS is exercising its authority to extend the hardship exemption” to individuals in this position.

Back in October, the federal government recognized a flaw in the way the initial open enrollment period was set up.  Since the “shared responsibility payment” (penalty/tax) affects anyone who has a gap in coverage of more than three months, anyone who enrolled after February 16 would not have coverage until April 1, resulting in a penalty.  HHS issued guidance on October 28, 2013 that created a hardship exemption for anyone in this position whose private insurance coverage was obtained during the open enrollment period but was not effective until after March 31.

In that October guidance, however, HHS apparently overlooked the fact that those applying for Medicaid or CHIP would face the same coverage gap, resulting in a violation of Obamacare’s individual mandate.  HHS rectified the oversight in guidance issued on Monday.

First, in regard to Medicaid, HHS says that since

the effective date of coverage for an individual who is determined eligible for Medicaid is the date of his or her application…, an individual who applies for coverage on or before March 31, 2014 and is found eligible for Medicaid based on that application will have Medicaid on or before March 31, 2014. Under these circumstances, even if such an individual did not have coverage before March 31st, he or she will qualify for a short coverage gap exemption for the period of time before his or her Medicaid coverage was not yet effective, back to January 1, 2014.

Second, regarding CHIP coverage, HHS says that since

CHIP effective dates typically follow the same rules as private insurance (meaning that an application date of March 31st may not yield a March 31st effective date), HHS is exercising its authority to extend the hardship exemption described in the October 28, 2013 guidance, to include individuals who apply for coverage during the initial open enrollment period and are found eligible for CHIP based on that application. The IRS and Treasury Department intend to publish guidance allowing an individual to claim a hardship exemption from the individual shared responsibility payment for the months in 2014 prior to the effective date of the individual’s CHIP coverage if the individual submits a coverage application prior to the close of the open enrollment period and is found eligible for CHIP. 

There is still much to be learned about the hardship exemptions and how they will be granted and approved.  HHS has not responded to multiple emails inquiring about the number of exemptions filed so far, and how those whose exemptions are turned down after the close of open enrollment might avoid the penalty.  But with Monday’s new guidance, the list of exemptions is growing, and HHS will need to clarify just how the process will work.

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