How Much Does the Individual Mandate Matter?

The Trump administration may loosen enforcement of Obamacare’s requirement that individuals buy insurance. But experts differ on how much the mandate actually drives people’s decisions.

FILE - In this Thursday, July 20, 2017, file photo, Budget Director Mick Mulvaney gestures as he speaks during the daily press briefing at the White House in Washington.
AP Photo/Pablo Martinez Monsivais
Aug. 1, 2017, 8 p.m.

The Trump administration has left the option open to weaken enforcement of the individual mandate, the least popular aspect of Obamacare, in their effort to undermine the health system while legislative efforts to repeal the law are on hold.

But that potential move raises an unresolved question: How much does the mandate really matter to the health of the Obamacare exchanges?

Health insurers have warned that scrapping or undermining the mandate would cause instability within the individual markets because there would no longer be a driver for young healthy people to buy health care. But experts are divided over how much of an impact getting rid of the requirement would actually have on people signing up for—or keeping—insurance.

“The marketplace will function,” said Thomas Miller, resident fellow at the American Enterprise Institute. (He added that an insurer with a health plan that customers don’t like would be more likely to emphasize that the mandate is essential.)

Rather, it’s the subsidies that are getting people to take coverage, Miller said. The subsidies that assist low-income people in the individual market with their out-of-pocket costs are once again on the chopping block. Health plans are required to provide these subsidies to patients, but the administration has waffled on whether to continue the payments to the insurance companies.

Hill Republicans and the Trump administration—who are considering not enforcing the individual mandate—have argued loudly in recent months that the mandate isn’t such a big driver for people to buy or keep insurance. In particular, they argue that the Congressional Budget Office overestimates how many people would suddenly drop coverage if the mandate were repealed. The CBO estimated that around 15 million more people in 2018 would be uninsured, mostly due to the repeal of the requirement.

White House budget director Mick Mulvaney has been especially critical of CBO, telling the Washington Examiner that its model put too much weight behind the mandate. “If the same person is doing the score of undoing Obamacare who did the scoring of Obamacare in the first place, my guess is that there is probably some sort of bias in favor of a government mandate,” he said following CBO’s analysis of the House repeal bill.

Chris Sloan, senior manager at Avalere Health, said CBO’s estimate of the mandate’s impact seems high, adding that this administration and the Obama administration both loosely applied the requirement.

Even if fewer people drop coverage than CBO estimates, consumers would still likely take a hit in their premiums. This could present a conundrum for Republicans who have consistently taken aim at the mandate as one of the most hated parts of Obamacare, but also have a stated goal to lower premiums.

Health and Human Services Secretary Tom Price suggested on ABC’s This Week that the mandate was driving up costs. He kept the option open to weakening the individual mandate through the use of waivers so that Obamacare “is no longer harming the patients of this land.”

But companies will likely raise premiums to handle the impact of the weakened mandate. “All of that aside, health plans think it’s very important. … We know for sure the premiums would go up,” said Sloan.

The left-leaning Center for American Progress has estimated that the average premium in the insurance marketplace would be about $1,238 higher if the mandate were repealed than it would be under current law.

Even if neither the administration nor Congress take real actions to weaken or repeal the mandate, communication around whether it is being enforced and whether it’s part of a larger plan to implode the market can have an impact.

“My impression is that more people are believing that’s not being enforced,” said health care expert Timothy Jost, a professor at Washington and Lee University School of Law. “I think insurers are writing that into their premium increases.”

This was seen in May when CareFirst BlueCross BlueShield filed proposed rates with substantial increases in Maryland, Virginia, and Washington, D.C. While it was not the only reason, the company said the lack of clarity regarding the enforcement of the mandate played a significant role in the filing.

A “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,” the company said in a statement. If there is a decision to discontinue funding of the cost-sharing reduction payments, CareFirst said further adjustments would need to be made.

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