Obamacare Critics Question CBO’s Estimates on Individual Mandate

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By Sara Hansard

Obamacare critics questioned whether the individual mandate is as effective as the Congressional Budget Office assumed it will be in the damaging report it released March 13 on the impact of Republicans’ health-care bill.

In that report, the CBO found that 14 million more people would be uninsured in 2018 under the Republicans’ American Health Care Act (AHCA), which would do away with the mandate, among other changes.

Critics of Obamacare point to a letter to Congress from IRS Commissioner John Koskinen noting that about 7.9 million people paid $1.6 billion in penalties for not having coverage and 12.4 million received exemptions from paying the penalty in 2014. A March 7 letter from the Blue Cross Blue Shield Association circulated on Capitol Hill supported “key provisions” of the AHCA, but the BCBSA said provisions in the bill encouraging people to keep continuous coverage should be strengthened.

AHCA supporters were playing defense after release of the CBO report estimating that 24 million more people would be uninsured in 2026 compared with coverage under the Affordable Care Act, which Republicans and President Donald Trump have vowed to repeal and replace. “They’re going to have to fix this,” health-care policy consultant Robert Laszewski, who has been critical of the ACA, told Bloomberg BNA March 14. “Clearly it won’t get through the Senate.”

Gruber: Report `Validates’ What Many Were Saying

“The report validates what many of us were saying,” Massachusetts Institute of Technology economics professor Jonathan Gruber told Bloomberg BNA March 14. Gruber helped design the ACA, also known as Obamacare.

“There’s no reason for this approach,” Gruber said of the Republican bill, which was approved March 9 by the House Ways and Means and Energy and Commerce committees. “This is just saying we did something about Obamacare and not really caring about the consequences.”

Under the AHCA people would have to pay a 30 percent premium surcharge for a year if they went without coverage for longer than 63 days. That would provide less incentive to stay covered than the ACA’s individual mandate, Gruber said. “Healthy people would wait until they got sick” to sign up for coverage, he said.

Eliminating the individual mandate penalties would increase average premiums for single policyholders in the nongroup market by 15 percent to 20 percent in 2018 and 2019, the CBO said, because “fewer comparatively healthy people” would sign up for coverage. Starting in 2020 grants to states from the AHCA’s Patient and State Stability Fund, which would likely be used to limit insurers’ costs for very high claims, elimination of health plan actuarial requirements and a younger mix of enrollees would more than offset the increase in premiums from repealing the mandate, the CBO said. And by 2026 average premiums would be about 10 percent lower than under current law.

Changes in premiums would “differ significantly for people of different ages because of a change in age-rating rules,” since insurers would be allowed to charge five times more for older enrollees than younger ones rather than three times more under current law, the CBO said.

BCBSA Recommendations

The one-page BCBSA March 7 policy recommendations said the AHCA’s late enrollment surcharge in 2017 “is likely to discourage healthy people from signing up. Instead, people that need medical care most will sign up, raising premiums and lowering the number of people covered.” The BCBSA recommended allowing states “to adopt a 6-month Medicare-like waiting period or other incentives for continuous coverage that work best in their state.”

But many dispute the effectiveness of the unpopular individual mandate and the penalty in the law for not keeping qualified coverage. “For the 20 million that got coverage under the ACA that’s great,” Christopher Condeluci, a former Senate Finance Committee staff aide who worked on the ACA, told Bloomberg BNA.

“But there were 20 million that didn’t take up coverage,” and either paid a penalty for not doing so or were granted exemptions from the requirement, said Condeluci, principal of CC Law & Policy, a health and tax legal and policy consulting firm. “I think that CBO is over-estimating the individual mandate’s impact.”

People’s Choice

There are also philosophical differences about whether people should be allowed to choose health insurance coverage. “These are people choosing to not be insured,” Douglas Holtz-Eakin, who was director of the CBO from 2003 to 2005 and has been critical of the ACA, told Bloomberg BNA.

“I would assume they’re picking the path that’s best for them,” said Holtz-Eakin, president of the conservative American Action Forum issue advocacy group. “Are they really worse off? It’s being characterized as being yanked out of their hands.”

ACA proponents have argued that the uninsured tend to raise health-care costs for others as hospitals and other medical providers recoup unpaid bills for charging more to people who have coverage.

Deficit Reduction

The AHCA would reduce federal deficits by $337 billion over the 2017-2026 period with the largest savings from reductions in outlays for Medicaid and from eliminating the ACA’s subsidies for nongroup health insurance, according to the CBO. That could give Republicans some leeway for making changes to the bill, Laszewski said.

For health insurers the worry is that “they have to price all over again in an uncertain environment,” Rebecca Owen, a health research actuary with the Society of Actuaries, told Bloomberg BNA March 14. As in 2014, when the major provisions of the ACA took effect, it isn’t clear what the risk pools would be like if the AHCA is enacted, she said.

About 2 million fewer people would enroll in employment-based coverage in 2020 under the AHCA and that number would grow to roughly 7 million in 2026, according to the CBO. The AHCA would eliminate the ACA’s employer mandate as well as the individual mandate, and part of the reduced employer coverage would occur because fewer employees would take up the offer of employer coverage in the absence of the individual mandate, the CBO said.

ACA critics are still betting that Republicans will enact legislation to significantly alter Obamacare. “We will get a bill on Trump’s desk this year,” Laszewski said. In 2017 premiums jumped an average of 25 percent in the ACA exchanges and many carriers have left the marketplaces.

“The carriers are going to be coming up with either huge rate increases or they’re going to be exiting markets” for 2018, Laszewski said. “Obamacare is not tenable in its current form. If Hillary Clinton were president we’d be at just about the same place.”

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

For More Information

The CBO report is at https://www.cbo.gov/publication/52486. The IRS letter is at https://www.irs.gov/pub/newsroom/irs_letter_aca_stats_010816.pdf. The Blue Cross Blue Shield Association letter is at http://src.bna.com/mXx.

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