Conservatives have spent years decrying the Affordable Care Act’s individual mandate as a threat to freedom itself. But they’re having a hard time coming up with something better.
The mandate is Obamacare’s unpleasant linchpin—critically important to making the law work as intended, yet deeply and consistently unpopular. Republicans have railed against the policy for years, but it’s proving to be a difficult stumbling block as their repeal-and-replace effort grows increasingly serious.
GOP lawmakers “boxed themselves in a corner” by framing the individual mandate as “pretty horrible,” said Wendy Weller, health policy associate professor at the University at Albany.
“I think it’s just hard to come up with something that meets their ideological agenda and actually works to incentivize people to purchase insurance,” she said.
The mandate was designed to force healthy people into the system, to offset the cost of guaranteeing coverage to sicker, more expensive patients. Repealing the policy would cause millions fewer people to buy insurance, causing premiums to be 15 to 20 percent higher in the first two years, according to the Congressional Budget Office.
Republicans have tried out two alternatives. The first was a 30 percent surcharge people would pay to their insurance companies if they dropped their coverage. But that would deter millions of healthy people from getting coverage, CBO said, leaving insurers with a sicker risk pool.
Last-minute changes to the American Health Care Act laid out another option states could adopt to encourage continuous coverage: a waiver allowing insurance companies to charge consumers higher premiums because of a preexisting condition, if they had let their coverage lapse. States could obtain a waiver only if they are operating some form of a risk-mitigation program or participating in a federal invisible risk-sharing program.
The amendment brought the House Freedom Caucus on board with the legislation, but it has also sparked political controversy: While the individual mandate is among Obamacare’s least popular provisions, its protections for people with preexisting conditions are its most popular. AARP and the American Hospital Association have also opposed the waiver proposal.
Timothy Jost, a law professor at Washington and Lee University School of Law, said the best option would be a stronger, rigorously enforced individual mandate.
“It seems to me that either you penalize people for not having coverage while they don’t have coverage—i.e. an individual mandate—or you penalize them when they try to get coverage—by a percentage premium increase, subjecting them to health-status underwriting, or locking them out of coverage for a time,” Jost said. “Any kind of penalty that applies when a person applies for coverage, however, penalizes people who are sick but not people who are healthy. We want healthy people to get covered, which is why Congress adopted an individual mandate.”
Cori Uccello, senior health fellow at the American Academy of Actuaries, said the waiver to allow medical underwriting wouldn’t deter as many healthy people as the premium surcharge, because those consumers wouldn’t have to pay a higher price.
She still questioned, however, whether it would drive healthy people to buy insurance.
“I’m not sure, if they put it off in the first place, why down the road they would purchase it,” she said. “I think the individual mandate would still be stronger than this kind of continuous coverage mechanism.”
Weller said she didn’t think either proposal would be as strong as the individual mandate, although she noted the mandate’s penalty is relatively small.
Allowing insurers to charge more based on preexisting conditions would be a stronger incentive for sick people than healthy ones, said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation.
“This incentive to maintain continuous coverage requires foresight on the part of people in order to encourage enrollment,” Levitt said, adding that it would be inevitably weaker than the individual mandate.
But Edmund Haislmaier, an expert in health care policy and markets at the Heritage Foundation, said the threat of higher premiums would be a stronger incentive than the 30 percent surcharge or the individual mandate, because “the downside price for gambling in that scenario is higher.”
Sally Pipes, president and CEO of the Pacific Research Institute, said additional changes, such as loosening Obamacare’s essential health benefits, could help lower premiums and encourage younger people to get covered. She worried, however, that making such changes through state waivers might not be permanent, as a future administration could undermine that strategy.
A GOP aide said the primary goal of the waiver process is to help lower premiums and stabilize markets, not necessarily to encourage continuous coverage.
Still, the underlying trade-off in the House’s bill—lowering healthy people’s premiums by potentially pricing sicker people out of the market—has quickly proven to be politically controversial.
Questions about whether the Trump administration will enforce the individual mandate have already taken a toll on insurance markets. CareFirst BlueCross BlueShield recently sought substantial premium increases for the plans it sells through the Obamacare exchanges in Maryland, Virginia, and Washington D.C.
Among other factors, CareFirst said enforcement of the individual mandate played a significant role in the company’s rate filing, “as failure to enforce the Individual Mandate makes it far more likely that healthier, younger individuals will drop coverage and drive up the cost for everyone else.”
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