The number of people paying the individual mandate has decreased, while the number claiming exemptions has risen.

Nov. 15—The repeal of the individual-insurance coverage mandate was added this week to one of the GOP tax reform bills moving through Congress, and industry advocates immediately pushed back.

Republican senators have added a repeal of the Affordable Care Act’s (ACA’s) individual mandate to their tax reform bill, and the provision would add $338 billion in savings, according to a recent Congressional Budget Office (CBO) projection.

However, repeal also would lead to an increase of more than 13 million in the number of uninsured by 2025 and to premium increases of about 10 percent “in most years of the decade,” according to CBO. The decrease in the number with insurance would include 5 million leaving Medicaid coverage, 5 million dropping individual-insurance plans, and 2 million forgoing employer-sponsored insurance.

The potential for such spikes drew concerns and condemnation from insurer and hospital advocates.

“There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need,” stated a joint letter from provider and health plan advocates, including the American Hospital Association and America’s Health Insurance Plans.

Those consequences will include a newly uninsured population that is “more likely to forgo preventative care, leading to potentially more complex and costlier treatments when they do eventually seek out care,” Darrell Kirch, MD, president and CEO of the Association of American Medical Colleges, said in a written statement.

America’s Essential Hospitals this week wrote a letter to the Senate Finance Committee urging it to either retain the mandate “or take aggressive steps in this legislation to shore up the individual market and ensure steady coverage for the millions who might lose it.” 

 But some industry watchers were uncertain about the reliability of the CBO projections.

The projections are based on expected 2018 ACA marketplace enrollments of 13 million, which exceeds the projections of other entities. The basis for the estimate is “a mystery,” said Ana Gupte, PhD, managing director with Leerink Partners.

Gupte expected the continuation of premium subsidies to have a stronger impact than the mandate and to “keep the market relatively stable.”

“I don’t know, if they repeal [the mandate] next year, that that is going to be the driver of the issue” of coverage losses, Gupte said. “It will be to some degree [the absence of] CSR [cost-sharing reduction payments] and rate increases for those people that don’t get the protection” of subsidies.

Although pre-ACA enrollments in states that lacked an individual mandate and required the availability of generous coverage—like New York—might hint at the result of the mandate’s repeal, no national precedent is available.

CBO is “unsure, they don’t know what the impact is going to be; we are in some ways into uncharted territory,” said Matthew Borsch, managing director of BMO Capital Markets. “We would expect the enrollment to be lower than it would be if the individual mandate were to stay in place.”   

Although most ACA marketplace enrollees—especially those who receive significant amounts of subsidies—are expected to retain their plans in the absence of the individual mandate, Sheryl Skolnick, PhD, managing director of Mizuho Securities USA, said a smaller number will drop coverage.

Penalties Increase

The proposed repeal of the mandate comes as its growing penalty was expected to drive more to obtain coverage, Skolnick said.

“This is the year that the mandate penalties were going to bite, and it was going to matter,” Skolnick said. “Up until now it’s been a kind of toothless dragon.”

Mandate tax penalties reached 2.5 percent of income or $695—whichever was higher—in 2016, and then the flat-dollar amount was to be adjusted for inflation in subsequent years, according to a Congressional Research Service report.

Around 6.5 million Americans paid penalties for failing to purchase qualifying health insurance in 2015, according to IRS data. That total was nearly 19 percent fewer than in 2014, when 8 million paid. The IRS collected $3 billion in penalties in 2015, averaging $470 per person who was penalized.

Meanwhile, about 12.7 million taxpayers claimed one or more of 14 healthcare coverage exemptions in 2015—up from 12 million in the previous year.

A recent analysis warned that rising premiums in 2018 could produce a surge in the number claiming exemptions to coverage due to a lack of affordable options.

Insurers have repeatedly urged the federal government to tighten exemptions to the individual mandate. Skolnick said regulators also need to better control new sign-ups that take place outside of open enrollment, during special enrollment periods (SEPs).

“When people had a [SEP] they were gaming the system—they’d get sick, they’d come in, they’d buy insurance, and get treated and go home,” Skolnick said. The Centers for Medicare & Medicaid Services “didn’t actually validate that they had that [SEP] eligibility.”

CSR Vote

Senate Republicans also have proposed a separate vote on the Alexander-Murray stabilization bill (called the Bipartisan Health Care Stabilization Act of 2017), which would appropriate $18 billion to fund CSR payments for two years. Those payments, which covered out-of-pocket costs for 58 percent of ACA marketplace enrollees in 2017, were ended in October by President Donald Trump, with a federal judge previously having ruled that they required a congressional appropriation.

The lack of CSRs could cut 2018 ACA marketplace enrollments from about 10 million to 8-8.5 million enrollees, Gupte said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, November 15, 2017