Mandate repeal sparks fears of premium hikes

Mandate repeal sparks fears of premium hikes
© Greg Nash

The move by Senate Republicans to repeal ObamaCare’s individual mandate could plunge insurance markets into uncertainty, leading to premium hikes or insurers dropping out of the market, experts say.

The mandate requires most people to either have health insurance or pay a fine. It was designed to ensure that people don’t wait until they are sick to buy health insurance, since ObamaCare also bars insurers from denying coverage based on pre-existing conditions.

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If the mandate is repealed in the tax-reform bill, as Senate Republicans propose, the fear is that only sick people would remain enrolled in the individual market, causing premiums to spike or insurers to simply drop out of the market.

“Repeal of the individual mandate could certainly be the straw that breaks the camel’s back,” said Larry Levitt, a health policy expert at the Kaiser Family Foundation.

“There could be a point where insurers just decide it’s not worth the risk” to participate in ObamaCare, Levitt added. “Repeal of the individual mandate seems like it could be that point.”

Several experts said they doubt that ObamaCare markets would collapse without a mandate. The subsidies provided under the health-care law serve as a buffer, shielding many enrollees from the cost of premium hikes.

“It is not catastrophic,” David Anderson, a health policy researcher at Duke University, said of losing the mandate. Still, he said premiums would rise and some insurers would likely drop out, limiting people’s choices.

Republicans would save the government roughly $300 billion by repealing the mandate, according to the Congressional Budget Office (CBO), because the government pays out less in subsidies when fewer people are enrolled. Those savings would help pay for the tax cuts in the bill.

GOP members of the Senate Finance Committee also argue that the mandate is imposing a “burdensome” financial penalty on people who are paying the fine for forgoing coverage. Nearly 80 percent of households paying the penalty make less than $50,000 per year, according to the IRS.

There are fears, though, about the larger effects of ending the mandate on the health insurance market.

A coalition of leading health-care groups, including America’s Health Insurance Plans and the American Medical Association, on Tuesday wrote a letter to Congress urging lawmakers to maintain the individual mandate.

“Eliminating the individual mandate by itself likely will result in a significant increase in premiums, which would in turn substantially increase the number of uninsured Americans,” the groups wrote.

The CBO estimates that premiums would rise 10 percent without the mandate and 13 million more people would be uninsured over a decade.

Still, the budget office also finds that markets would “continue to be stable in almost all areas of the country” if the mandate went away.

Some experts say that the effectiveness of the mandate in enticing healthy people to enroll has been overestimated, and repealing it would not be as bad as some predict.

James Capretta, a health policy expert at the right-leaning American Enterprise Institute, said he thinks the impact of repealing the mandate will land somewhere in the middle between catastrophic and negligible.

“Things are already pretty shaky and unstable and it will make it even more shaky and unstable,” Capretta said.

While subsidies help shield people from the effects of premium increases, the danger is that all of the insurers could drop out of certain areas, leaving people nowhere to turn for health insurance.

“Whether or not repeal of the individual mandate is cataclysmic really depends on how insurers react,” Levitt said.

Capretta said he did not think many counties would have no insurers even without a mandate, because insurers would be attracted to the idea of having a monopoly.

“I don’t think we’re ever going to see that many [counties] with no insurers,” he said. “No insurance means there’s an opportunity there for someone to be a monopolist.”

Anderson, the Duke researcher, agreed that most counties would still have one insurer, but said there could be areas with multiple insurers where some drop out, limiting options.

“The market should be attractive enough to get at least one insurer into pretty much everywhere,” he said.

President Trump’s executive order last month, though, adds another complication. It proposed expanding the use of short-term health insurance plans that would be skimpier and cheaper than ObamaCare plans. Those could draw more healthy people away from ObamaCare after the mandate is repealed.

Those who could be hardest hit are middle-class people who make too much money to qualify for subsidies and would have to bear the burden of premium increases without a mandate.

Sen. Susan CollinsSusan Margaret CollinsCollins: My office has gotten 'pretty ugly voicemails, threats' over Kavanaugh The Memo: Tide turns on Kavanaugh Budowsky: Kavanaugh and the rights of women MORE (R-Maine), a key swing vote, expressed worry for those unsubsidized people on Wednesday.

“I have data that demonstrates that for certain middle income individuals and couples who do not qualify for subsidies under the [Affordable Care Act], they make a little bit too much money, that the premium increase will outweigh the tax cut that they get,” Collins said.

Marty Anderson, chief marketing officer of Security Health Plan, which offers ObamaCare coverage in Wisconsin, said that while he supports maintaining the mandate, the subsidies are a bigger factor in getting people to enroll.

“As long as those subsidies remain in place, it’s not going to be a catastrophic drop-off,” he said.