The tax bill headed for passage eliminates the Affordable Care Act’s mandate that most people have insurance. No one is sure what that will do to health care.
WASHINGTON — For years, the Obama administration said the health care system as constructed by the Affordable Care Act could not survive without a mandate that most Americans have health insurance. With surgical precision, the sweeping tax bill that Republicans plan to pass this week will do away with that mandate.
What comes next for health care seems to be anybody’s guess.
The demise of the Affordable Care Act’s mandate will lead to higher premiums and lower enrollment in plans sold on the health law’s marketplace, Wendy K. Mariner, a professor of health law at Boston University, said Monday. But she added, “I don’t think we can say with any confidence” how much premiums will rise or coverage will decline.
The Republicans’ move came as something of a surprise. Democrats rejoiced when they defeated multiple Republican efforts to dismantle the health law this year. But Republicans have never wavered in their opposition to the mandate, which they see as a symbol of government overreach.
Democrats enacted the mandate, and President Barack Obama defended it all the way to the Supreme Court. But he knew it was unpopular, and his administration was not keen on enforcing it.
The mandate has been enforced with “a muffled bark and a toothless bite,” said Thomas P. Miller, a health economist at the American Enterprise Institute and a critic of the law.
Insurance companies and Democrats in Congress find themselves in rare agreement, predicting that premiums will soar and insurance markets will swoon if the government can no longer threaten people with tax penalties for going without health insurance. The Congressional Budget Office estimates that repealing the mandate penalties would increase premiums by 10 percent and leave four million more people uninsured in 2019 and 13 million more uninsured by 2027.
Remarkably, after the millions of words written by lawyers to attack and defend the mandate in court, the tax bill wipes it out with just two sentences. The penalty is either a flat dollar amount, $695 for an adult, or 2.5 percent of household income above a certain threshold, whichever is greater. The tax bill slices the penalty to “$0” and “zero percent,” starting in 2019, relieving taxpayers of $43 billion in penalties they would otherwise pay through 2027, the budget office says.
Researchers say the mandate sends a signal about the importance of coverage. Without it, the Congressional Budget Office estimates that five million fewer people would have coverage through the individual insurance market, five million fewer would be enrolled in Medicaid and three million fewer would have employer-sponsored insurance.
“Medicaid and the subsidies explain maybe two-thirds of the increase in coverage under the Affordable Care Act,” said Jonathan Gruber, a health economist at the Massachusetts Institute of Technology who advised the Obama administration, referring to tax subsidies for the purchase of insurance policies.
“But about a third of the increase in coverage is unexplained,” he said. “We think a lot of that is due to the signal in the law. People say, ‘Hey, there’s this new law, I should go sign up now.’ That signal is getting reversed.”
Eliminating the mandate will save the government more than $300 billion over 10 years because fewer people will receive insurance subsidies or Medicaid, the budget office estimates.
Though Republicans are counting on those savings to help offset the cost of their tax cuts, they say they doubt the power of the mandate.
In the weeks before he went to work at the White House, Brian Blase, President Trump’s special assistant for health care policy, said that the Congressional Budget Office had “significantly overestimated the degree to which the individual mandate would induce relatively healthy people with middle-class income to buy coverage in the exchanges.”
Most people with marketplace coverage receive subsidies so they are largely insulated from premium increases, Ms. Mariner said. For people who do not receive subsidies, she said, “the higher premiums could be devastating, and the insurance market will look a lot like it did before the Affordable Care Act.”
Ana Gupte, a health care analyst at Leerink Partners in New York, said Monday: “It is the carrot of the subsidies rather than the mandate that drives enrollment on the insurance exchanges. The stick is not as effective as the carrot.”
Other parts of the law remain in force. The federal government will still help pay premiums for people with low or moderate income. It will still prohibit insurers from denying coverage or charging higher premiums because of a person’s medical condition or history. It will still require insurers to provide specified benefits like maternity care and drug addiction treatment. And millions of people who became eligible for Medicaid as a result of the expansion of the program under the Affordable Care Act can keep their coverage.
In the absence of an enforceable mandate, the people most likely to go without insurance are younger and healthier consumers — the very people insurers would most like to have as customers.
Senator Sherrod Brown, Democrat of Ohio, said the tax bill was a bad deal because many people would pay more in higher premiums than they would receive in tax cuts.
But moderate Republicans who defied their leaders and voted against repeal of the Affordable Care Act in the summer now support the tax bill.
“Eliminating the tax penalty does not take care away from anyone,” said Senator Lisa Murkowski, Republican of Alaska. “Instead, it provides important relief to those who have been penalized for choosing not to buy unaffordable insurance.”
