Administration opens first hole in health law mandate

WASHINGTON -- The Obama administration has opened a small, but potentially important, hole in a key requirement of the new healthcare law, letting some people who have had insurance policies cancelled avoid the requirement to buy coverage next year.

The change, announced Thursday night in a letter that Health and Human Services Secretary Kathleen Sebelius sent to a group of senators, marks the first exception the administration has allowed to the law’s so-called individual mandate.

Under the new policy, people who have received notices that their health plans are being canceled would qualify for hardship exemptions allowed by the law. Under those exemptions, they could buy low-cost catastrophic health plans or skip buying health coverage altogether.

The low-cost plans, which provide bare-bones coverage, are otherwise available only to some people younger than 30.

The number of people directly affected by the change may be relatively small. Administration officials said earlier Thursday that they believed about 500,000 people nationwide had received notices canceling existing policies and had not yet bought new coverage.

Since those people already had purchased coverage at a time when no law required it, a large percentage of them presumably will buy coverage next year rather than take advantage of the new exemption.

But even if that turns out to be the case and the number of people claiming exemptions is small relative to the size of the insurance market, the political impact of the change could be large. The exemption policy constitutes the first crack in the wall for the requirement to buy coverage.

Republicans, who have campaigned fiercely against the requirement that people buy insurance, probably will now seize on the new exemption as a precedent.

Health insurers have insisted the mandate that everyone buy insurance is necessary to keep coverage affordable and were quick to criticize the new policy.

The change, coming less than two weeks before new health plans take effect on Jan. 1, “could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,” Karen Ignagni, the head of America’s Health Insurance Plans, the industry trade group, said in a statement.

The new policy stems from one of the biggest political problems Obama has faced with the troubled rollout of the healthcare law -- his promise that the people who liked their existing health plans could keep them. When several million people nationwide began receiving notices that their plans would be canceled because the plans fell short of the new law’s requirements, Obama suffered a sharp drop in public trust.

Democrats in Congress, especially senators facing tough reelection challenges next year, were bitterly upset at the predicament in which Obama’s words had placed them. They have pressured the administration to respond to angry constituents.

Sebelius made the latest concession in a letter to six senators: Democrats Mark R. Warner and Tim Kaine of Virginia, Jeanne Shaheen of New Hampshire, Mary L. Landrieu of Louisiana and Heidi Heitkamp of North Dakota and independent Angus King of Maine. Landrieu and Shaheen are up for reelection in 2014, and the Louisiana race already promises to be close.

In a statement, the six said the change would “help those consumers who have had their plans canceled this year transition more smoothly into the marketplace.”

david.lauter@latimes.com

On twitter @DavidLauter