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Yes, the Massive Coverage Losses From Repealing the Individual Mandate Would Be Harmful

November 16, 2017 at 4:00 PM

The Congressional Budget Office (CBO) estimates that repealing the Affordable Care Act (ACA) mandate that people get health coverage or pay a penalty, as Senate Finance Committee Chairman Orrin Hatch’s revised tax bill would do, would cause 13 million Americans to become uninsured. Some Republicans argue that these coverage losses — which would generate savings to help pay for making the bill’s corporate rate cut permanent — aren’t troubling because they’d all be “voluntary” (that is, people would choose to go uninsured). But as we’ve explained, this view is deeply mistaken:

  • Some of the coverage losses wouldn’t be “voluntary” in any sense. They would occur because repealing the mandate would hurt the individual market risk pool by leading fewer healthy people to sign up for coverage, raising premiums to the point where some people simply couldn’t afford them.
  • Many other people would become uninsured because they wouldn’t realize they were eligible for Medicaid or marketplace financial assistance. Awareness of the mandate is what leads some people to explore their coverage options and learn that they are eligible for Medicaid, which they might not otherwise discover unless they became seriously ill. Signing up for Medicaid then allows these individuals to get preventive and primary care.

    The same is true for people eligible for marketplace subsidies. For example, among marketplace-eligible uninsured people with incomes below 400 percent of the poverty level (about $100,000 for a family of four), 70 percent can buy 2018 coverage for less than they would otherwise pay in penalties. But some of these people will only learn that they are eligible for financial assistance because of the mandate. Coverage losses that result because individuals never learn about programs or financial assistance for which they’re eligible are also not “voluntary” in any meaningful sense.

  • Regardless of why they lose coverage, those who become uninsured suffer harm. The uninsured lack access to preventive care, are less likely to receive needed care, and have worse health outcomes, research shows. They’re also exposed to financial catastrophe or medical bankruptcy if they become seriously ill and seek treatment. People tend to undervalue protection from uncertain but severe adverse events, compared to the immediate costs of buying health insurance, and the mandate helps counteract this myopia.

  • Many of those who would become uninsured would ultimately get seriously ill or injured and seek care, but would be unable to pay for it. Other participants in the health system would then have to pay for their care — involuntarily. The increase in uncompensated care costs could force some providers to close their doors or cut back spending in ways that undermine the quality of care. Providers might also raise prices, shifting costs to people with private insurance coverage (including employer coverage). Or, states or the federal government might be forced to step in to cover some of these uncompensated care costs, shifting costs to taxpayers.

    As Massachusetts’ Republican Governor Charlie Baker explained:

    “When Massachusetts passed its universal health care law in 2006, it included an individual mandate, which I support. I support it for two reasons. First of all, no one really knows when they might get sick or have a tragic accident, and if they do get sick or have an accident, they will seek care, it will be provided, and in many circumstances, they will be unable to pay for it. . . .

    “Second, if people have unlimited access to purchase coverage, many will purchase health insurance only when they need it, and then drop it once their care is provided, defeating the whole point behind insurance coverage. Insurance coverage is about shared risk. We all have coverage so that together, we can pay for the care provided to the small number of people who need very expensive care. . . .  If people do not have to carry coverage when they are healthy, and can access it only when they get sick, break a leg, need to have a procedure, or something else, then the rest of us are unfairly tagged with paying for the cost of their care.”

The large — and involuntary — premium increases due to repeal would also harm millions of people who retained coverage. As noted above, without the individual mandate, fewer healthy people would sign up for individual market coverage, leaving a sicker overall risk poll and higher average costs. CBO estimates that repeal would raise premiums by about 10 percent, while some major insurers have said they would have to raise premiums across the board by about 15 percent if the individual mandate were repealed or no longer enforced.

About 7 million people buy coverage in the ACA individual market (either inside or outside the marketplaces) without premium tax credits. Some 1.5 million of them have a serious pre-existing health condition, one severe enough that they would likely have been denied coverage before the ACA, and many more likely have less severe pre-existing conditions like asthma, high blood pressure, or depression.

Faced with large premium increases, some unsubsidized individual market consumers would drop coverage, as discussed above, but many others — especially those with pre-existing conditions — would simply have to pay more. As Senator Susan Collins correctly noted, for these middle-income consumers, individual mandate repeal would feel no different than any other tax increase. And for many, it would likely erase — or significantly more than erase — any tax benefits they would otherwise receive from Chairman Hatch’s revised tax bill.

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