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Trump is opening up a new front in his war against Obamacare

The president’s new target: the individual mandate.

Trump Nicholas Kamm / Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

Having failed to repeal Obamacare in full, President Trump is planning to gut the health care law’s unpopular yet vital individual mandate — one way or another.

The president has already tweeted that he wants the mandate to be repealed as part of the Republican tax overhaul. But if Trump can’t get Congress to do that, he is reportedly readying an executive order that would defang the mandate, even if he can’t totally repeal it without Congress.

The Washington Examiner, citing an anonymous Republican senator, reported Monday that Trump had prepared an executive order to exempt more people from the mandate’s penalty for not having health coverage:

Trump cannot repeal the individual mandate through executive order, but he can broaden "hardship exemptions," which under Obamacare are left to the discretion of the administration. The exemptions allow customers to have ways to get out of paying the fine for not having coverage, which is $695 per adult or 2.5 percent of income, whichever is higher.

The Washington Post later confirmed that the Trump administration had drafted an executive order targeting the mandate.

The law’s supporters say the individual mandate is necessary for the rest of Obamacare to work. Without that incentive for young and healthy people to buy into the system, Obamacare could wind up in a death spiral where only sick people buy coverage and premiums skyrocket. Trump is preparing to kick one of the law’s legs out from under it — and that could put the ACA’s long-term stability at risk.

This would be yet another front in Trump’s multi-pronged attack on Obamacare, one that is projected to lead to millions fewer Americans having insurance and coverage becoming increasingly unaffordable.

Trump wants to repeal the individual mandate in the tax bill

Trump’s preference seems to be repealing the mandate through the Republican tax bill. The current tax bill doesn’t touch the mandate, but House Speaker Paul Ryan said adding its repeal is under discussion. Influential lawmakers such as House Freedom Caucus Chair Mark Meadows also want the mandate repealed in the tax plan — which would finally give Republicans a win after their year-long failure to repeal Obamacare. They would also be discarding by far the least popular part of the law.

Repealing the mandate through the tax bill has a few other advantages, from the Republican point of view.

An executive order could not fully eliminate the individual mandate like Congress could, and dealing with it legislatively actually saves the federal government money in a way that can be used for tax reform — about $400 billion over 10 years, according to the Congressional Budget Office, because fewer people would be covered by the law’s financial assistance and Medicaid expansion.

Under the Senate’s complex procedural rules, the tax plan can increase the deficit by $1.5 trillion over 10 years. The House bill currently hits that target exactly. It would be hard to make any further changes to the bill that reduce revenue or increase spending.

But by putting the mandate repeal in the tax bill, suddenly Congress would have another $400 billion to play with while tweaking their plan. They could cut rates for businesses and individuals even more, increase some tax deductions and tax credits, or otherwise spend more money in their bill in a way they can’t right now.

However, adding a health care provision to the tax plan is politically risky. House Ways and Means Chair Kevin Brady (R-TX) and Senate Finance Chair Orrin Hatch (R-UT), who are overseeing the tax plan, are wary. Senate Republicans have already proven unable to pass even the narrowest Obamacare repeal plan, and the tax bill is working with a small margin for error — 50 of the 52 Republican senators must back it.

So trying to add the mandate’s repeal would further complicate an already complicated path to passage for the GOP’s tax bill in the Senate, the party’s last best hope for a major legislative win this year.

But if Trump can’t get his way and repeal the mandate through the tax bill, he has this executive order as a backup plan. The Washington Examiner, citing the unnamed senator, indicated that Trump would hold off on the order with the hopes that the mandate repeal would be added to the tax legislation. Otherwise, he’ll take matters into his own hands.

Trump’s order would likely expand the “hardship exemptions” from the individual mandate, which allows people to avoid paying the penalty — $695 or 2.5 percent of their income, whichever is higher — if they demonstrate they can’t afford insurance.

The Obama administration broadened these hardship exemptions already. For example, they exempted people who would have qualified for Medicaid expansion in states that refused to expand the program under Obamacare from the mandate’s penalty.

We don’t know the specifics yet of the Trump order. But it is likely the president would build on those exemptions to allow as many people as possible to escape the mandate.

Undoing the individual mandate means millions more uninsured people

Why is the mandate so critical to Obamacare? The law required insurers to cover everybody, no matter their medical history, at similar rates. That was going to raise costs for health insurers, because they could no longer discriminate against people with preexisting conditions. But the risk was that only sick people would buy coverage, which would create a “death spiral” of skyrocketing premiums.

So the ACA also required everybody to buy insurance with the individual mandate, which would bring healthy people into the market and offset the costs of insuring people with higher medical bills. (The law also makes insurance more affordable with its generous financial assistance to those below a certain income, the third leg of the proverbial stool.)

However Trump does it, the consequences of repealing or defanging the mandate are millions fewer Americans having health insurance and premiums increasing for people who remain in the Obamacare marketplaces.

For starters, the Congressional Budget Office has estimated 15 million fewer Americans would have insurance over the next 10 years if the mandate were fully repealed.

That’s why repealing the mandate actually saves money — because fewer Americans would be enrolled in Medicaid and on Obamacare’s insurance marketplaces, where they receive federal assistance.

Repealing the mandate is also going to increase premiums for people who still purchase insurance through the ACA. The mandate is in the law to encourage young and healthy people to sign up for coverage. Without it, those people are more likely to leave the market, which will make the remaining market older, sicker, and ultimately more expensive.

“CBO and JCT estimate that adverse selection would increase premiums for policies in the nongroup market, whether purchased through the marketplaces or not, by roughly 20 percent relative to premiums under current law,” the office said.

We’ve already seen an effect on next year’s insurance premiums, because the Trump administration has hinted for a while that it would target the mandate. Various actuaries and policy experts told me that uncertainty about the mandate had driven 2018 rates 10 percent higher than they otherwise would have been.

Over the long term, when I asked health care experts to imagine what Obamacare will look like in 2020 under Trump, several of them cited unraveling the mandate as the biggest risk to the law. They envisioned a narrower and narrower market, where only the sickest people or people receiving the most financial assistance buy coverage — the very eventuality the mandate is supposed to prevent.

“The mandate is a much bigger wound to the law than any of these other things that we’re talking about,” Joel Ario, a former state insurance commissioner who oversaw the early years of the ACA marketplaces, told me.

Given Trump’s transparent intentions to sabotage Obamacare, it should be no surprise he is targeting the mandate.

It remains, despite its importance to the ACA, the most unpopular part of the law. Republicans also consider the mandate an affront to personal liberty — it was the foundation of the 2012 Supreme Court case challenging Obamacare’s constitutionality.

So the president appears set to unwind the mandate, whether through the tax bill or through his executive authority. But the cost is a less stable market, with fewer people insured and higher premiums for everybody else.

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