Repealing Obamacare: The Push To Eliminate The Individual Mandate
The Trump team has made it clear they are going after the highly unpopular individual mandate in the Affordable Care Act.
Trump adviser Kellyanne Conway said on ABC’s “This Week”, “What President Trump is doing is, he wants to get rid of that Obamacare penalty almost immediately, because that is something that is really strangling a lot of Americans to have to pay a penalty for not buying.”
Host George Stephanopoulos interrupted, “So, he’ll stop enforcing that mandate?” Conway replied, “He may. But look, we want to make very clear to everyone, that those who are relying upon coverage will not lose it.”
This proposed move to eliminate or stop enforcing the individual mandate needs to be examined from three perspectives: its legality, how it plays politically, and its policy impact.
Legality of eliminating the mandate unilaterally
Legally, it is an open question if the Trump administration can do this on its own. The law is clear that there is supposed to be an individual mandate, but the executive branch has broad latitude when it comes to interpretation and enforcement of all laws. And as Nicholas Bagley pointed out, President Obama already set the precedent of using highly questionable authority to delay provisions in the Affordable Care Act (ACA) that were politically problematic for him.
Private insurers could try to sue Trump to stop him from interfering with the mandate, but the optics of that would be terrible for insurers and Democrats while great for Trump.
Even if Trump can’t fully “eliminate” the mandate via executive action, he could probably “delay” it each year or have the IRS use its enforcement discretion to very publicly claim they will never put any resources into verifying that people follow it (a wink-nod similar to what Obama did with marijuana legalization).
Of course, questioning the limits of Trump’s authority on this could be moot, since Republicans control Congress and could easily eliminate the mandate in a reconciliation bill early this year.
Politically, it is a winning move
Trump campaigned on repealing Obamacare and this is by far the most unpopular part of the law.
The government making people give them money for public goods via a new tax is already politically difficult. Add the extra wrinkle that an individual mandate without a public option is the government instead forcing people to give money to deeply unpopular private insurance companies for overpriced products and services and you create a perfect storm for popular disdain. The policy contains all the downsides of a new tax with the added stink of corporatism and the extra expense put on the middle class of using a system proven to be inefficient.
This is why Democrats’ decision not to include a public option in the ACA had political implications we are still dealing with. For example, polling from 2014 found that by a margin of two-to-one, the public opposed the individual mandate. It is a provision that negatively impacted millions of people directly last year.
This move could also shift the current conversation on health care. Instead of talking about people losing coverage—which is a talking point for Democrats—they may instead spend their time defending the necessity of the deeply unpopular mandate. This would make Democrats look like stooges of the private insurance industry.
The lack of an individual mandate could also make it easy for Trump to find Democratic Senate votes for a real Obamacare replacement. If Democrats honestly believe their claims that Obamacare will fall apart without the mandate, they might not be willing to play chicken with Republicans.
Democrats say their strategy is to blame Trump if healthcare gets a lot worse after a full repeal. However, it is tough to gauge whom voters will blame if Republicans don’t do a full repeal and instead say, “Democrats forced us to leave most of Obamacare in place, and it failed on its own.”
Don’t put too much faith in any policy projections
The Congressional Budget Office (CBO) claims eliminating the individual mandate would increase premiums on the exchange by 20 percent to 25 percent, and 18 million people would become uninsured. Some liberals and insurers even think this move could cause a death spiral on the exchanges.
I find these analyses dubious for several reasons. Anyone who tells you they really understand the full impact of repealing the mandate is not being honest with you, given how unique the rule is.
For starters, there are projections that differ significantly from the CBO’s, such as a Rand analysis from 2015, which found eliminating the mandate would increase premiums by only 8 percent in 2017 and increase the number of uninsured by only 12.3 million.
Additionally, the CBO has a history of dramatically overestimating how effective this mandate would be. Back in 2014, the CBO claimed that starting in 2017, between 24 million and 25 million people would obtain coverage each year through exchanges. While open enrollment isn’t yet done for 2017, the Obama administration has predicted signups will reach only 13.8 million this year.
As for the risk of a “death spiral,” I feel it is effectively eliminated by the fact that 83% of people on the exchange qualify for subsidies. The subsidies are designed so that people only pay a set percentage of their income, regardless of how high premiums technically rise. Since premium increases don’t impact most people on the exchange, the feedback loop is limited.
Even if in principle you think an individual mandate should have important policy implications, it is hard to say this mandate is doing its job. The enforcement for it is already very weak and full of exemptions.
From a policy perspective, a mandate only works well when almost no one is actually paying the penalty for skirting it and almost no one is exempt. According the IRS, 12.7 million taxpayers last year claimed an exemption from the mandate and 6.5 million taxpayers paid the penalty. We also don’t have a good idea of how many people simply lied about coverage to avoid the penalty, since the IRS already effectively does not enforce it.
There is no doubt that delaying or eliminating the mandate would result in some healthier people choosing not to buy private insurance and likely some increases in premiums. Yet how significant that impact would be is a big unknown.