Good Riddance to the Individual Mandate

A woman reads a leaflet at a health insurance enrollment event in Cudahy, Calif., in 2014. (Lucy Nicholson/Reuters)

In response to Buttigieg’s Mandate Makes Sense

I’m afraid I have to disagree with Kevin’s argument that “Republicans were wrong to repeal the [individual] mandate while leaving much of the rest of the ACA regime in place.” I’ve shared his concerns in the past, but at this point it seems clear that the mandate’s demise, which occurred at the beginning of this year, won’t have any of the most-feared effects. On balance it was a very good move.

Obamacare’s drafters wanted to ban insurance companies from discriminating against those with preexisting conditions, but didn’t want people to respond by waiting to get sick before they bought insurance. The sicker the folks buying insurance, the higher premiums have to be — and when premiums go up, even more healthy people drop their insurance, setting off the dreaded “death spiral.” The solution was simply to require everyone to get insurance or pay a penalty.

As it happened, though, the mandate wasn’t all that effective, and those who actually signed up on the Obamacare exchanges tended to receive hefty subsidies that limited their costs to a low percentage of their income. These folks have less of a reason to skip buying insurance, as they’re not paying much for it anyway — and if premiums go up, their cost cap stays the same and the government pays the difference.

Essentially, whenever anything threatens the health of the Obamacare exchanges, they self-stabilize at taxpayer expense. Republicans learned this the hard way when they tried to cut off some payments to insurers but ended up hiking subsidies and thereby making Obamacare plans cheaper.

Now that the health wonks have figured this out, the fear isn’t of a death spiral, but of a moderate — maybe 10 percent — increase in premiums over time thanks to the end of the mandate. And the consequences of these higher premiums aren’t as bad as you might think, either for the government or for the folks who actually pay their full premiums instead of a percentage of their incomes.

As for the government, the higher subsidies for those who enroll will probably be canceled out by the fact that some won’t enroll (and thus won’t get their subsidies) if they’re not forced to. As of the middle of last year, the CBO anticipated net savings from lower “subsidized enrollment through the marketplaces, partly offset by an increase in the estimated per-person cost of that coverage.” The Commonwealth Fund was less confident, saying the effect on the federal budget could range “from a reduction of $8 billion to an increase of $3.6 billion in 2020.” Exchange enrollment did fall slightly for the 2019 plan year and again, according to preliminary data, for 2020, while premiums seem to have leveled off after years of growth, but it’ll take a few years to really work out the accounting.

And as for the middle-class participants in the individual market who always fared worst under Obamacare — as they faced high premiums while receiving small or no subsidies — they now have much better options for buying other, more affordable insurance. Trump has boosted the availability of alternatives such as “short-term, limited duration” plans, and of course going with a non-Obamacare-compliant plan now carries no penalty. (By the way, any state that doesn’t like any of this is free to reinstate the mandate and/or ban non-Obamacare-compliant plans.)

However bumbling their health-care maneuvers have been, Republicans have eliminated a policy they’ve long said was coercive and unconstitutional; likely saved the government money; maintained Obamacare’s generous insurance options for the poor and working class, if only because they proved so inept at repealing them; and freed the middle class to buy plans outside of Obamacare’s regulations. It’s not a system anyone would design from scratch, but it’s better than what we had when everyone was forced to buy a specific kind of insurance or pay a fine.

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