Delaying the Individual Mandate Would Result in Millions More Uninsured and Higher Premiums
By Edwin
Park
Updated October 30, 2013 - Center on Budget and Policy Priorities
House Energy and Commerce Committee Chairman Fred Upton recently indicated
that the House may vote again on a one-year delay of health reformfs individual
mandate — which will require most Americans to obtain health coverage or pay a
penalty starting in 2014 — citing the current difficulties in enrolling
through the federal exchange website.[1] The Administration has already issued guidance
clarifying that any individual now without health insurance who enrolls in
exchange coverage by the end of the open enrollment period on March 31, 2014
would not have to pay a penalty.[2] Most importantly, a one-year delay in the
individual mandate would adversely affect millions of Americans.
The Congressional Budget Office (CBO) has estimated that such a delay would
cause 11 million more Americans to remain uninsured in 2014 and result in
higher premiums for many others. It also would disrupt the new health
insurance exchanges in the middle of the open enrollment season .
Specifically, a one-year delay of the individual mandate would reduce the
expected coverage gains under the Affordable Care Act (ACA) by nearly 85
percent, relative to current law, according to a recent CBO estimate.
Delaying the individual mandate also would raise premiums for health insurance
purchased in the individual market in 2014, CBO finds.
Earlier CBO estimates indicated that permanently repealing the mandate would
raise average health insurance premiums in the individual market — inside and
outside the new health insurance exchanges — by 15 percent to 20 percent,
amounting to hundreds or thousands of dollars a year in higher premium charges
for large numbers of individuals and families. Without the individual
mandate, the exchanges may well not be viable over the long run; the higher
premiums would discourage many healthier people from enrolling, sending
premiums up still more.
Indeed, thatfs likely a core goal of those who seek a one-year delay.
A year from now, they would demand another one-year delay and then another or
outright repeal (especially if ACA opponents pick up more seats in coming
elections). Thus, we should see the one-year delay for what it is — a
central element of an effort to dismember health reform over the next few
years.
Finally, a delay in the mandate would severely disrupt the open-enrollment
season (which started on October 1), and likely push back the date at which
coverage through the exchanges will first be in effect, scheduled for January
1, 2014. Insurers have submitted premium rates for plans they will offer
in 2014 based on the assumption that the mandate will be in effect, as
the law requires. If Congress cancels the individual mandate for 2014,
insurers will very likely withdraw their bids, demand time to calculate higher
premiums, and submit new, and likely substantially increased, premium
rates.
Without a Mandate, Millions More Americans Will Be Uninsured
The individual mandate will spur more people without coverage to enroll in
the health insurance options available to them in 2014 — through their jobs,
public programs like Medicaid and the Childrenfs Health Insurance Program
(CHIP), or subsidized coverage through the new health insurance
exchanges. Without the mandate, many fewer people would enroll in health
coverage.
A one-year delay in the individual mandate, which the House also passed in
July, would result in about 11 million more uninsured people in 2014, CBO
estimates.[3] (In addition, 2 million more people would be
uninsured in 2015, and 1 million more would be uninsured in 2016, relative to
current law). Because CBO estimates that, under current law, the ACA will
result in 13 million people who would otherwise be uninsured gaining health
coverage in 2014, a one-year delay in the mandate would slash expected coverage
gains next year by nearly 85 percent.
Outside analysts examining the effects of repealing the mandate entirely
have produced similar estimates:
- The Urban Institute estimates that relative to current law, the lack of a
mandate would result in 13.4 million to 15.8 million more people without
health insurance coverage.[4]
- Massachusetts Institute of Technology (MIT) health economist Jonathan
Gruber estimates that the number of uninsured would be 24 million higher
without a mandate.[5]
- RAND Corporation analysts expect the number of uninsured to rise by 12.5
million without a mandate.[6]
- The Lewin Group projects that without a mandate, there would be 7.8
million more uninsured individuals.[7]
Delay Would Sharply Raise Premiums in the Exchanges and the Outside
Individual Market
Starting in 2014, the ACA prohibits many of the most troublesome practices
of health insurers in todayfs flawed individual market — such as denying
coverage to people with pre-existing conditions like cancer or diabetes, or
charging sick people higher premiums.
Without an individual mandate to encourage people to enroll in coverage,
these market reforms would make health care coverage less affordable by
enabling older and sicker people (who largely have been shut out of the
individual insurance market) to buy coverage in the individual market while
allowing healthier uninsured people to wait until they get sick to buy
it. The pool of people with coverage in the individual market would get
older and sicker, so premiums would rise substantially. These large
premium hikes would lead some healthier people to go without insurance, which
would raise premiums still higher and further discourage healthier people from
keeping their coverage.
CBO thus expects a one-year delay in the individual mandate to gresult in
higher health insurance premiums in the non-group market (that is, premiums for
individually purchased health insurance) in 2014.h[8] While CBO does not specify the magnitude of the
premium increases that would result from a one-year delay, earlier CBO
estimates examining the impact of permanently repealing the individual mandate
found that average premiums in the individual market inside and outside the
exchanges would rise by 15 percent to 20 percent, relative to current law.[9]
Outside analysts estimating the effects of permanently repealing the individual
mandate concur with CBO:
- The Urban Institute estimates that without any individual mandate,
average individual-market premiums under the ACA would increase by roughly 10
percent to 25 percent.[10]
- MITfs Gruber estimates that average individual market premiums would be
27 percent higher than under current law.[11]
- RAND expects that average premiums in the individual market would rise by
9.3 percent without the mandate.[12]
- The Lewin Group estimates that average premiums in the individual market
would increase by 12.6 percent without the mandate.[13]
Mandate Delay Could Disrupt the New Health Insurance Exchanges
Because insurers have already submitted their premium rates for the plans
they will offer in 2014, on the assumption that the individual mandate will be
in effect, a one-year delay would risk severely disrupting the start of the new
exchanges. If the individual mandate were delayed this fall, insurers
would immediately ask for significant time to recalculate the higher premiums
they would need to charge to take the mandate delay into account. That
would likely suspend the open-enrollment period that started on October 1 and
potentially push back the January 1, 2014 start for when exchange coverage
will be effective. Individuals and families seeking to purchase coverage
through the exchanges would have to wait longer to enroll in exchange plans and
obtain coverage. The delay in the individual mandate would also similarly
affect plans offered in the individual market outside of the exchange.
Conclusion
Delaying the individual mandate for one year would undermine health reform
just as the major coverage expansions are set to take effect in 2014.
Millions more people would remain uninsured. It would also drive up
premiums sharply in the reformed individual market inside and outside the new
exchanges, as well as disrupt exchange operations in the middle of the open
enrollment season. Policymakers should firmly reject any a delay .
End notes:
[1] Jake Sherman, gGOP May Vote Again to Delay Obamacare,h
Politico, October 25, 2013, http://dyn.politico.com/printstory.cfm?uuid=D24AFCED-18BC-4B2C-8699-527E840F2C19.
[2] Center for Consumer Information and Insurance Oversight,
Centers for Medicare and Medicaid Services, gShared Responsibility Provision
Question and Answer,h October 28, 2013, http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/enrollment-period-faq-10-28-2013.pdf.
[3] CBO expects that under a delay, 5 million fewer uninsured
people would enroll in Medicaid and CHIP, 4 million fewer would enroll in
job-based coverage, and 2 million fewer would enroll in the individual market
inside and outside the exchanges. Congressional Budget Office, gH.R.
2668: An Act to delay the application of the individual health insurance
mandate, to delay the application of the employer health insurance mandate, and
for other purposes,h September 6, 2013, http://cbo.gov/sites/default/files/cbofiles/attachments/hr2668_2.pdf.
[4] The estimate range is the result of differing assumptions
about overall participation in the exchanges and among people with low and
modest incomes who are eligible for premium subsidies to purchase exchange
coverage. Matthew Buettgens and Caitlin Carroll, gEliminating the
Individual Mandate: Effects on Premiums, Coverage, and Uncompensated Care,h
Urban Institute, January 2012, http://www.urban.org/UploadedPDF/412480-Eliminating-the-Individual-Mandate.pdf.
[5] Jonathan Gruber, gHealth Care Reform Without the Individual
Mandate,h Center for American Progress, February 2011, http://www.americanprogress.org/wp-content/uploads/issues/2011/02/pdf/gruber_mandate.pdf.
[6] Christine Eibner and Carter Price, gThe Effect of the
Affordable Care Act on Enrollment and Premiums, With and Without the Individual
Mandate,h RAND Corporation, 2012, http://www.rand.org/content/dam/rand/pubs/technical_reports/2012/RAND_TR1221.pdf.
[7] John Sheils and Randall Haught, gWithout the Individual
Mandate, the Affordable Care Act Would Still Cover 23 Million, Premiums Would
Rise Less than Predicted,h Health Affairs, November 2011.
[8] Congressional Budget Office, op cit.
[9] CBO also previously estimated that permanently repealing
the individual mandate would increase the number of uninsured by 16 million in
2021, relative to current law. Jessica Banthin, gEffects of Eliminating
the Individual Mandate to Obtain Health Insurance: Presentation at RAND BGOV
Event on the Individual Mandate,h Congressional Budget Office, March 20,
2012, http://cbo.gov/sites/default/files/cbofiles/attachments/RAND_BGOV_EliminatingIndividualMandate03-20.pdf.
See also Congressional Budget Office, gReducing the Deficit: Spending and
Revenue Options,h March 2011 (Revenues-Option 32, pp. 199-200), http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/120xx/doc12085/03-10-reducingthedeficit.pdf.
[10] Buettgens and Carroll.
[11] Gruber.
[12] Eibner and Price. If also adjusting for changes in
the average age of individuals enrolling in the individual market (i.e. without
a mandate, people in the individual market will be older, on average), RAND
estimates that average premiums would increase by 2.4 percent.
[13] Sheils and Haught.