In January 2012, 27 senators sent the Supreme Court a 48-page legal brief.
The Supreme Court would soon hear a landmark case on the legality of the Affordable Care Act’s individual mandate. These senators wanted to warn the justices of grave consequences of repealing the requirement to carry health coverage.
“The individual mandate,” they wrote, “is at the heart of the PPACA. The remainder of the statute necessarily depends on its inclusion because without the mandate, the statute’s reforms cannot work as intended.”
The senators who wrote this letter were (and are) Republicans. The 23 senators who wrote this letter and still serve today voted to support a tax bill that repeal this provision that, in their own words, will mean Obamacare’s “reforms cannot work as intended.”
Senators have not developed a sudden case of amnesia — they have not forgotten the consequences of mandate repeal. Many spoke out against the idea of standalone repeal of the individual mandate this summer, when senators introduced a bill known as “skinny repeal.”
That bill, like the tax bill, would have repealed the requirement to carry coverage — and senators harshly attacked it as a terrible policy.
“The skinny bill as policy is a disaster,” Sen. Lindsey Graham (R-SC) said at the time. “It is not a replacement in and of itself.”
But skinny repeal is essentially what Republicans have attached to their tax bill. And that provision runs the very real risk of causing disruption and possibly collapse in the Obamacare insurance marketplaces.
Repealing the individual mandate would destabilize the individual insurance market
The Senate bill includes a provision to repeal the Affordable Care Act’s requirement that nearly all Americans carry insurance coverage, known as “the individual mandate.”
Republicans see it as a winning move. The individual mandate is very unpopular. And repealing it will save more than $300 billion — which can pay for big tax cuts for corporations and the very wealthy.
The best economic evidence we have shows that if the individual mandate disappears, premiums go up and millions of Americans lose coverage. The Congressional Budget Office pegs the decline in the number of insured at 13 million.
Other economists are skeptical of the exact number — they say the coverage loss might be less — but they agree that we’re talking about some number in the millions. The question isn’t whether the number of people with insurance will go down. The question is how many millions it will go down by.
“It’s clearly going to be millions,” says MIT economist Jon Gruber, who advised the Obama administration on the Affordable Care Act and had studied Massachusetts’s individual mandate. Is it going to be 5 million, 7 million, or 13 million? I can’t tell you the exact number, but I can tell you it’s definitely in the millions.”
The CBO expects the coverage loss would look quite similar to what you would have seen under other Senate health plans, like the Better Care Reconciliation Act (the main repeal bill in the chamber) or the skinny repeal plan.
Economists roundly expect premiums to rise if the individual mandate disappears, as healthier people exit the market, leaving behind a sicker, more expensive insurance pool.
Some Americans may gladly exit the marketplace, happy to no longer pay insurance premiums. But there would also be those who exit unwillingly, people who want to buy coverage but cannot afford the rising cost of health insurance.
“Premiums go up,” says Benjamin Sommers, a health economist at Harvard. “Some people want coverage but have a lot going on in their lives, and may not enroll.”
The evidence from states is clear: mandates are critical to making Obamacare work
Much of what we know about the individual mandate comes from states that have implemented or repealed insurance mandates.
In the late 1990s, for example, Washington state passed reforms similar to the Affordable Care Act. It banned preexisting conditions and required all residents to carry health coverage.
But that second policy was barred from taking effect. Insurance companies didn’t want to sell in a market where they had to accept everyone but people could decide not to purchase coverage.
One insurance plan increased its premiums 78 percent over three years. By 1999, no insurance plans would sell coverage in Washington. The market was dead — and the state ultimately had to repeal its ban on preexisting conditions to bring it back to life.
As one report from the Washington State Insurance Commissioner’s Office described it, the insurance market has entered a “death spiral,” with customers only buying coverage “when they needed it.”
“If you only have people who need care the most, insurance becomes really expensive really fast,” Jim Havens, who ran an insurance plan in Washington, recently told the Los Angeles Times of the debacle. “A mandate is fundamentally so important to make insurance affordable.”
And in Massachusetts, we’ve seen the individual mandate play an important role in its 2006 coverage expansion.
The state phased in the new policies. First, it provided subsidies to make health insurance affordable for low-income residents. Then six months later, it began to charge a fine for remaining uncovered.
A 2011 paper in the New England Journal of Medicine found a big spike in enrollments after the mandate took effect, suggesting that the financial help wasn’t enough to entice uninsured Massachusetts residents to enroll in coverage. The threat of the penalty also played a big role.
“There was a phase-in period, and we found that for healthy people, the subsidies were not sufficient inducement to buy health insurance,” says Amitabh Chandra, a Harvard economist who led the NEJM study. “There was a subsidy, and if people are rational actors, maybe they buy insurance, but people are irrational actors and they might just play on Bumble or Tinder and put off buying coverage until tomorrow.”
The CBO estimates that repealing Obamacare would reduce enrollment in the marketplaces by 8 million and in Medicaid by 5 million. That last finding can be a bit puzzling: Why would a mandate have any bearing on whether people enroll in a free health insurance program like Medicaid?
But it turns out economists who study these issues have decent reason to expect that Medicaid enrollment would decline without a mandate.
One of the things they’ve observed with the Affordable Care Act is a “welcome mat” effect for Medicaid: people who were previously eligible for the program suddenly signing up when the Affordable Care Act took effect. They think some of that is due to the increased advertising for Obamacare, and some of it due to the fact that people heard it was now required by law to get coverage.
“If the main effect is that people collectively have the sense that ‘I have to sign up for coverage,’ that can have a big impact,” says Sommers. “It’s reasonable that CBO is projecting some people in Medicaid might not stay, or new people who might be eligible might not go to the trouble of applying.”
Red states may be hit by individual mandate repeal the hardest
If the individual mandate repeal does survive into the final tax bill, some experts expect that states that supported President Trump may face the worst outcomes.
These states tend to have the weakest health insurance markets. Many only have one health insurance plan selling coverage. If that one plan decides it doesn’t want to sell in a marketplace without a mandate, it could leave residents with zero health options.
(To be sure, Obamacare’s subsidies have served as an inducement to get insurance plans into some of these less desirable marketplaces — it is alluring for insurance plans to sell in highly subsidized monopoly markets.)
Los Angeles Times reporter Noam Levey identifies “Alaska, Iowa, Missouri, Nebraska, Nevada and Wyoming” as the states at risk for having “no options for coverage or health plans that are prohibitively expensive.” These are states that only have one health plan selling on the Obamacare marketplace right now.
What’s more, states that support Obamacare may take the protective step of passing their own individual mandate to continue nudging residents into coverage.
“There is nothing stopping states from adopting their own state mandates, that could track the federal mandate precisely or be a variation,” says Nicholas Bagley, a health policy expert at the University of Michigan.
It’s easy to envision a West Coast wall of insurance mandates as California, Oregon, and Washington move to protect the Affordable Care Act. Washington, DC, has already begun to explore the idea.
It’s harder to imagine Southeastern states like Mississippi and Alabama — places that have long rejected the health law’s Medicaid expansion — taking the same actions.
This could drive up the disparities between states that take action to replace the mandate and those who don’t. “You’re quite likely to see that as an outcome,” Bagley says.
The tax bill is skinny repeal in disguise
Republicans didn’t like skinny repeal when it was a standalone policy. They railed against the negative consequences. But now, 52 senators have voted to essentially turn skinny repeal into policy buy tacking the individual mandate repeal onto their tax bill.
This doesn’t change the consequences — the “disaster” that Republicans predicted earlier this year. That stays the same, even of the votes in Congress have changed, and will affect millions of Americans who rely on the Affordable Care Act for coverage.