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CBO: Individual Mandate Delay Would Mean More Uninsured, Higher Premiums

We’ve previously explained why a one-year delay of health reform’s individual mandate, which the House passed in July, is a bad idea — and now the Congressional Budget Office (CBO) confirms our assessment.

The mandate requires most Americans to obtain health coverage or pay a penalty starting in 2014 and, as we’ve noted, a one-year delay would likely result in many more uninsured Americans and higher health insurance premiums in the reformed individual market, including health reform’s new exchanges (also known as marketplaces).

Now, in its new analysis of the House bill delaying the mandate for a year, CBO finds:

  • The delay would raise the number of uninsured Americans by 11 million in 2014.  Because CBO now estimates that, under current law, health reform will result in 13 million people who would otherwise be uninsured gaining health coverage in 2014, this means that a one-year delay in the mandate would slash expected coverage gains next year by nearly 85 percent.

    CBO assumes that “the existence of the mandate and its associated penalties will spur increased enrollment in health insurance coverage.”  But, without the mandate, fewer uninsured people will enroll in the health coverage options that are available to them.  With a delay of the mandate, CBO estimates that in 2014, 5 million fewer uninsured individuals would newly enroll in Medicaid and the Children’s Health Insurance Program, 4 million fewer uninsured would enroll in job-based coverage, and 2 million fewer would enroll in the individual market including through the exchanges.
  • The delay would also result in higher health insurance premiums in the individual market in 2014.

    CBO says that’s so because, regardless of the delay, health reform would still require insurers “to provide coverage to any applicant, would not be able to vary premiums to reflect enrollees’ health status or to limit coverage of preexisting medical conditions, and would be allowed to vary premiums by age only to a limited degree.”  People with relatively high expected health care costs, such as those who are older and sicker, would be more likely to continue to enroll in coverage even without a mandate.  The delay in the mandate to 2015 would thus disproportionately affect younger and healthier people, who would be less likely to opt for coverage in 2014.  That would push premiums higher, CBO finds.