GOP Replacement For Obamacare’s Individual Mandate: Worse Than Doing Nothing

Few provisions within Obamacare have proved less popular than the individual mandate, which requires all Americans to secure insurance or pay a fine. Unfortunately, some Senate Republicans are proposing a replacement that’s even worse.

As part of their bid to repeal Obamacare, Sens. Bill Cassidy, R-La., and Susan Collins, R-Maine, want to allow states to automatically enroll the uninsured in health plans.

At least Obamacare let people choose whether to buy health insurance or not. Sens. Cassidy and Collins are calling for an even heavier dose of government paternalism, one that would increase federal spending, line the pockets of insurers, and raise premiums.

The Cassidy-Collins plan would provide refundable tax credits that would, in theory, cover the entire premium for a catastrophic health plan — chosen by the government, of course. States would take those credits and ship them directly to insurance companies in return for covering folks who hadn’t secured coverage on their own.

Republicans have spent almost a decade decrying Obamacare’s individual mandate as big government run amok. For the first time in our nation’s history, the federal government ordered all Americans to purchase a specific product.

Auto-enrollment takes federal meddling to new heights. Individuals would no longer have the option of foregoing insurance and paying a fine. Instead, they’d have to affirmatively opt out of their government-approved plan — after they’d already been forced into the system.

Managing that system would be a logistical nightmare. People’s health insurance status changes all the time. An uninsured American could suddenly get a job and gain coverage through work. Similarly, a newlywed could sign onto their spouse’s plan. Or, less happily, someone could lose their job — and their insurance along with it.

Even Obamacare didn’t try to track the coverage status of all 320 million-plus Americans. It relied on them to honestly report whether they had health insurance on their income tax returns. Millions didn’t bother to do so.

Republicans have also devoted the better part of a decade to criticizing Obamacare’s sweetheart deals with the insurance industry. They’ve decried the billions of taxpayer dollars that Obamacare set aside for insurers if they lost too much money on the exchanges. The House of Representatives sued the Obama administration to try to stop it from paying insurers for the costs they incurred covering low-income enrollees’ out-of-pocket expenses.

Yet Cassidy, Collins, and company now support an auto-enrollment scheme that would divert federal cash directly into insurers’ bank accounts. They don’t have to try to attract customers or collect premiums. They just wait for the government to give them the names of the uninsured, and then they cash the government’s check.

For insurers, the only thing better than Obamacare’s mandate that people purchase their product is a new law requiring people to opt out of their product.

The auto-enrollment tab could also grow costly for the federal government. Under Obamacare, despite the individual mandate and that law’s raft of subsidies, more than 25 million people are still uninsured. Buying them all insurance coverage would represent a substantial new federal outlay.

Finally, auto-enrollment may keep premiums higher than they’d be in a competitive market.

Most Republican replacements for Obamacare, including the House-passed American Health Care Act, give refundable tax credits to individuals and charge them with shopping around for the policy that meets their needs and budget. If they don’t spend a portion of their credit, they can deposit the remainder in a Health Savings Account and use it for out-of-pocket expenses.

But what insurer is going to sell a policy that’s cheaper than the value of the tax credit — if they know they can get the full tax credit via auto-enrollment?

Republicans have been promising to repeal Obamacare’s individual mandate since it took effect. Replacing it with an auto-enrollment scheme would represent a move in the opposite direction.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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