Senators Tom Cotton, R-Ark., and Pat Toomey, R-Pa., recently introduced a bill that would effectively repeal Obamacare’s individual mandate, which fines people for going without health insurance.
Their effort has its share of fans. President Trump has called on Congress to include repeal of the mandate in whatever tax reform bill emerges.
Fiscal conservatives tend to favor the move, too — the Congressional Budget Office announced November 8 that repealing the mandate would save the federal government $338 billion over the next decade.
Unfortunately, the Senate didn’t include repeal of the mandate in the tax reform package it unveiled November 9. The House hasn’t done so, either.
Neither chamber’s tax reform package is final, though. So there’s still time for lawmakers to correct their mistake — and jettison the individual mandate. It has failed to deliver universal coverage as promised — and has instead turned millions of American citizens into criminals for doing nothing more than declining to purchase outrageously expensive insurance.
According to the logic behind the individual mandate, requiring healthy people to buy insurance will moderate the cost of coverage for the sick — and thus make universal coverage possible. Those who ignore the directive have to pay a tax of 2.5% of household income or $695 per adult, whichever is greater.
The mandate hasn’t worked. In 2014, the Congressional Budget Office predicted that 24 million people would obtain coverage through Obamacare’s insurance exchanges by 2017. As of March, barely 10 million were enrolled.
A disproportionate number of those enrollees have been old and sick. Insurers need young people to comprise about 40% of the risk pool to offset the costs of care for older, sicker customers. Last year, only 26% of enrollees were 34 years old or younger.
So insurers have hemorrhaged money. To stem their losses, they’ve hiked premiums. Since 2013, premiums are up 99% for individuals — and 140% for families.
Next year, premiums for Obamacare’s most popular “silver” plans will jump 37%, on average.
These rate hikes have made insurance unaffordable for millions of people. Last year, 45% of uninsured adults cited the cost of coverage when explaining why they did not purchase coverage.
Many healthy people have concluded that exchange plans aren’t worth the price. In 2016, 6.5 million people — one-quarter of all uninsured U.S. residents — paid the individual mandate penalty. That cost them $3 billion. Roughly 80% of those folks earned less than $50,000.
Almost 13 million others didn’t buy insurance but qualified for one of the law’s various exemptions. For instance, people who can’t find a 2018 exchange plan for less than 8.05% of their household income can claim a “marketplace affordability” exemption. So they won’t have to pay the penalty.
The Cotton-Toomey bill, the Mandate Relief Act, acknowledges that the mandate hasn’t worked — and would free millions of Americans from choosing between costly insurance and an unjust fine. Households that earn less than the national median income of $59,039 wouldn’t pay the penalty. People who live in regions with fewer than two insurers on the exchange, or who live in counties where premiums increased by more than 10% in the past year, would also be exempt.
Nearly all Americans who currently pay the penalty meet at least one of these criteria.
The Mandate Relief Act’s provisions enjoy widespread support. Nearly seven in ten Americans want to repeal the individual mandate.
It’s baffling why lawmakers searching for a way to pay for tax reform don’t support mandate repeal in similar numbers. Repeal would deliver hundreds of billions in savings because fewer people would buy subsidized coverage through Obamacare’s exchanges if they weren’t required to by law.
Even generous federal subsidies for those making up to four times the poverty line, or $98,400 for a family of four, wouldn’t be enough to make the hefty price of exchange coverage worth it. Indeed, the Congressional Budget Office believes that 13 million fewer people would enroll in Obamacare-compliant plans if the individual mandate were repealed.
Congress failed to repeal and replace Obamacare in one fell swoop. But lawmakers can relieve millions of Americans from one of the law’s most burdensome mandates by taking up the Toomey-Cotton proposal — whether as a part of tax reform, or on its own.