Saving Obamacare Without Congress

Oct. 21 (Bloomberg) -- The failures of have reignited the question of whether and how the federal government should delay the penalty for not buying insurance. Here’s half an answer: If the administration of President Barack Obama opts for delay, a provision of the Affordable Care Act gives it the legal authority to do so, without turning to Congress.

Technological problems have crippled the Obamacare exchanges, most severely the ones that the federal government is running through With the exchanges not working, people without other coverage options can’t obtain health insurance. And if they can’t get insurance, they can’t fulfill their obligations under the law’s individual mandate.

In response, some are already suggesting a need to delay the mandate. That’s still premature; programmers are working feverishly to fix the website, and it’s possible the problems will be solved within a few weeks.

But it’s also possible those fixes could take months. The clock is ticking: If the websites aren’t working by early next year, people may not be able to obtain coverage by April 1, 2014. After that date, anyone without coverage may be subject to a tax penalty. However, to have coverage by April 1, individuals need to sign up by mid-February to accommodate the processing time.

Functioning Exchanges

The problem comes if the exchange websites aren’t fixed before people have to buy insurance to comply with the individual mandate. Under the law, the mandate applies whether or not there’s a functional exchange. That means that the penalty would be imposed even on those uninsured who had tried, and failed, to buy insurance on an exchange. Extending the open-enrollment period, as some have suggested, wouldn’t fix the problem: If you had no coverage before April 1, you’d still have to pay the penalty.

It would be unfair, though, to penalize people for failing to buy insurance from a website that’s broken. In principle, of course, one could purchase insurance off the exchange. But subsidies are only available for exchange-purchased coverage. And the whole point of the subsidies is that many Americans can’t afford insurance without them.

Fortunately, there’s a better solution. The federal government has the legal flexibility to waive the penalty for people subject to the mandate but unable to access a functioning exchange website.

Nestled in the health-care law is a “hardship exemption.” It waives the penalty for anyone who “is determined by the Secretary of Health and Human Services under section 1311(d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.” In turn, section 1311 requires exchanges to “grant a certification” for particular individuals attesting that “there is no affordable qualified health plan available through the Exchange.”

Putting the two provisions together, it could be a “hardship” if there’s “no affordable qualified health plan available through the Exchange.” That statutory language fits this case: if an exchange doesn’t work, then no plans are available through it. Health and Human Services Secretary Kathleen Sebelius has already issued hardship exemptions for discrete groups, including people who would have qualified for Medicaid but for their state’s decision not to expand the program. She could do the same for those who can’t access an exchange.

That doesn’t mean there aren’t wrinkles. Section 1311 seems to say an exchange must grant a certification before one can get a hardship exemption. The statute is a bit ambiguous on that point, but, in a rule implementing the hardship exemption, that’s how Sebelius appears to read it. After she decides what counts as a hardship, the exchanges are supposed to process applications from individuals claiming that hardship. Then, and only then, can you get a “certificate of exemption.”

Exemption Applications

So how can you apply for an exemption through an exchange that doesn’t work? You can’t, of course. And it gets worse. Even those state exchanges that are up and running apparently don’t have the systems in place to deal with exemption applications.

Fortunately, that’s not the end of the story. The secretary is explicitly empowered in yet another provision of the law to “establish a program” for determining “whether to grant a certification” for a hardship exemption. That gives Sebelius latitude to craft sensible certification rules for the exchanges.

As things stand, the rules the secretary has put in place provide for an individualized application process. But nothing in the law prevents her from tweaking that approach. If necessary, she could draft a new rule instructing nonfunctional exchanges -- including the federally operated ones -- to issue blanket certifications on behalf of all of the uninsured in their states. With those blanket certifications, the penalty would be waived -- and all without congressional action.

With luck, it won’t come to that and the exchanges will all be operational long before mid-February. But if they aren’t, the Obama administration could spare the uninsured from being punished just because government officials couldn’t build a few websites on time.

In the meantime, Congress is always free to help by reshaping the individual mandate or its timing. But, politics being what it is -- and especially as it pertains to the health care law -- it’s unrealistic to think that the legislature will act to address the law’s problems. Thankfully, at least on this count, it doesn’t need to.

(Nicholas Bagley is an assistant professor of law at the University of Michigan Law School. Austin Frakt is a health economist with the U.S. Department of Veterans Affairs.)

To contact the writer of this article: Nicholas Bagley at; Austin Frakt at

To contact the editor responsible for this article: Christopher Flavelle at

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