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Delaying Penalty for Lacking Health Coverage Would Mean More Uninsured, Higher Premiums

The House is expected to vote tomorrow on a bill to effectively delay health reform’s individual mandate by eliminating the penalty for failing to have coverage in 2014.  As we explained last fall, delaying the individual mandate would produce significant harm and severely undermine health reform, resulting in:

  • More uninsured Americans.  The individual mandate spurs uninsured people to enroll in insurance through their jobs, public programs like Medicaid and the Children’s Health Insurance Program (CHIP), or subsidized private coverage through health reform’s new marketplaces.  Without a penalty, many fewer people would enroll.  The Congressional Budget Office (CBO) estimated last fall that a one-year delay of the individual mandate would have caused 11 million more Americans to remain uninsured in 2014, erasing 85 percent of the expected coverage gains this year.
  • Higher premiums in the individual market.  As the American Academy of Actuaries wrote in November, the individual mandate encourages young and healthy people, as well as older and sicker ones, to obtain health coverage.  Without a penalty for failing to comply, fewer healthier people would likely buy coverage in the individual market both inside and outside the marketplaces before the end of the 2014 open enrollment period (and, for those who qualify, during special enrollment periods over the course of the year).  Also, many fewer healthier people would likely enroll in coverage for 2015 during this fall’s open enrollment period because some people would expect another delay in the penalty.

    These changes would make the pool of people with individual-market coverage sicker, on average, than insurers would otherwise anticipate for 2014 and 2015.  Insurers also would likely worry about another delay in the mandate for 2015.  Accordingly, insurers would have to raise premiums for next year substantially compared to 2014, a year in which they assumed the individual mandate would be fully in effect.  Some insurers might even withdraw from the marketplaces entirely for 2015.

    CBO previously projected that a one-year delay in the individual mandate would have raised premiums in the individual market in 2014.  While it didn’t say by how much, CBO earlier estimated that permanently repealing the mandate would raise premiums by 15-20 percent.  Outside analysts, including Massachusetts Institute of Technology health economist Jonathan Gruber and experts from the Urban Institute, the RAND Corporation, and the Lewin Group, also expect repealing the mandate to generate substantial premium increases.

    These premium hikes for 2015 would lead additional healthier people to forgo individual-market coverage.  That, in turn, would result in still higher premiums and even more uninsured people.

House Republicans will likely argue that delaying the individual mandate would only be “fair” because the Administration recently delayed the employer responsibility requirement for some employers for another year.  But, as we previously explained, there’s no comparison between the modest effects on coverage and premiums of the Administration’s new policy and the serious harm from effectively delaying the individual mandate until 2015.