Open enrollment season for health insurance is just around the corner. Starting November 1, Americans who don’t get coverage through work or the government will be able to sign up for health plans that take effect in 2019.
Fewer will do so this year than last, according to a recent report from the Congressional Budget Office. Last open enrollment, 11.8 million people signed up through the exchanges; roughly 5 million purchased plans “off-exchange” through agents or directly from insurers. This time, the CBO projects that just 12 million people in total will purchase individual-market plans — whether on or off the exchanges.
Progressives claim this drop is the product of sabotage by the Trump administration. But fewer people will sign up because Obamacare has made coverage too expensive. Fortunately, the administration has teed up several executive actions that could make insurance more affordable for those who shop in the individual market.
Democrats allege that the GOP’s elimination of the individual mandate, which requires all adults to obtain insurance or pay a fine of the greater of $695 or 2.5 percent of income, will cause people to “lose” coverage. Repeal of the mandate takes effect January 1, 2019.
But Democrats are misdiagnosing the problem. The CBO report explains that people “will forgo health insurance” because “the penalty associated with the individual mandate will be eliminated and premiums faced by people who are ineligible for subsidies in the nongroup market will be higher.” In other words, people will no longer have to sign up for coverage they don’t want and can’t afford.
Obamacare’s authors knew the individual mandate would be unpopular. But they thought it was needed to prod young, healthy people to buy coverage — and thereby ensure a diversified pool of enrollees that would keep premiums stable.
Many found a way around the mandate. In both 2015 and 2016, more than 10 million taxpayers claimed exemptions from it. Others have chosen to pay the penalty for going without coverage — 8.1 million in 2014 and 6.7 million in 2015. Most have been from households with modest incomes. IRS data show that more than three in four people who paid the penalty in 2015 earned less than $50,000 a year; more than one in three earned less than $25,000.
All these people dodging the mandate meant that the pool was never as diversified as it needed to be. Actuaries estimated that 40 percent of exchange enrollees would need to be young and healthy to subsidize coverage for older, sicker people. But the young and healthy have only accounted for a little over one-fourth of the enrollment share.
This confluence of events is why the average exchange premium doubled in Obamacare’s first four years. Between 2017 and 2018, average exchange premiums rose more than 30 percent. Removing the penalty will cause some people to drop insurance. But the answer isn’t to reinstitute the penalty, as some states are trying; it’s to bring affordable insurance options to the market.
The Trump administration has just finalized a rule that will allow consumers to buy “short-term” coverage that lasts up to 364 days and can be renewed up to 36 months. This would do the trick.
In one of his last acts as president, Obama limited short-term insurance to just three months. And since federal regulators didn’t count short-term policies as “qualified health plans,” people who purchased them still had to pay the mandate penalty. President Trump and Congress will make these plans more viable by permitting them to last three years and eliminating the mandate penalty. They don’t have to comply with Obamacare’s guaranteed issue, community rating, and essential health benefits mandates — which require insurers to offer a comprehensive suite of benefits to everyone, regardless of their health, at the same rate. Consequently, short-term plans can cost one-third as much as exchange policies.
The CBO estimates that 2 million people will enroll in short-terms plan after the new rules take effect in September. Hundreds of thousands of them would have otherwise gone uninsured.
Onerous regulations have made insurance unaffordable for millions. Only the principles of market competition can make insurance affordable again — and thus reduce the number of people without coverage.