While Republican leaders at the federal and state levels have chipped away from the Affordable Care Act, Democrats haven’t succeeded in bringing back the ACA's individual mandate penalty to their states.
The Republican-led Congress approved a tax package at the end of last year that zeroed out the ACA’s individual mandate penalty starting in 2019.
Payers fear that removing the mandate penalty will result in healthy people dropping health insurance and fleeing the ACA exchanges. That, in turn, will create unstable markets, which will lead to payers increasing premiums to offset the instability.
Congress approved zeroing out the individual mandate penalty in December after a year of failed efforts to repeal the ACA.
The individual mandate was considered one of the most unpopular part of the ACA. Some Americans were upset at the idea of being told what to do, and they especially don’t like getting whacked with a penalty at tax time. So, killing the mandate wasn't as politically problematic as cutting a more popular aspect of the ACA, such as Medicaid expansion or essential health benefits.
Democrats — and many payers — viewed the individual mandate as a key part of the ACA, but Republicans saw the penalty as a tax that restricted free choice. Payers, along with a number of health policy experts, say that without the mandate, risk pools will become lopsided and the markets will destabilize. That means higher premium rates.
In fact, the Congressional Budget Office predicted that premiums will increase by 10% annually in most years because of people dropping coverage. The CBO projected 13 million people will lose or drop insurance over the next decade.
The individual mandate penalty remains in place this year, which could be one reason no states have implemented their own mandate. Legislatures often need a hard deadline before passing important legislation, so they might not feel pressure to act immediately.
However, payers will likely view this inaction negatively. Payers like stability. When they don’t have it, they increase rates. So, if states wait longer to approve their own individual mandate, ACA exchange payers will likely increase premiums even higher next year.
Meanwhile, Democratic-leaning Massachusetts already has its own individual mandate. The Massachusetts health insurance law that passed when Republican Mitt Romney was governor is still in place, as is its individual mandate penalty. So, that blue state does not have to worry about changes made to the ACA’s individual mandate penalty.
While Democrats haven’t passed individual mandate legislation at the state level, Republicans have been working with the Trump administration to further dilute the ACA. CMS has granted waivers to three states for work requirements for Medicaid recipients and more states have shown interest. Medicaid expansion was the major driver behind getting more people insured as part of the ACA, but Republican efforts are looking to reverse that trend.
The Trump administration has also signed executive orders and released policies that further look to damage the ACA, including expanding short-term catastrophic plans and association health plans. President Donald Trump additionally stopped cost-sharing reduction payments to ACA exchange payers and cut open enrollment for those plans in half last year.
It’s not just the executive and legislative branches taking whacks at the ACA. Republicans are also hoping the courts will help their effort in using the individual mandate penalty’s demise as a way to kill the entire ACA. Twenty states are suing the federal government and charging that the ACA is now unconstitutional because of the end of the individual mandate penalty.