The Right Way To Kill ObamaCare’s Individual Mandate | Stock News & Stock Market Analysis

There are powerful reasons to kill ObamaCare’s individual mandate to buy health insurance. This regressive tax has fallen primarily on modest earners who face a choice of paying a fine or buying the cheapest $7,000-deductible plan, which may be of little use until long after their finances are in distress.

XAutoplay: On | Off Yet how the individual mandate is eliminated makes all the difference in the world. If done while easing up on ObamaCare’s counterproductive rules — from the employer mandate to coverage options that have led just as many people to leave subsidies on the table as to claim them — getting rid of the mandate could facilitate a big step toward universal coverage.

But getting rid of the mandate in the way Republicans propose, as a $300 billion pay-for that will help keep the cost of tax legislation under the $1.5 trillion maximum allowed under Senate rules, would not only ensure that millions of people drop their insurance on top of the 28 million already uninsured, but it would deepen already-daunting fiscal challenges and seriously undermine any hope of fixing our troubled individual insurance market for the foreseeable future.

Understanding the true impact of repealing the individual mandate is necessary for making sense of the Joint Committee on Taxation’s official score of the Senate tax legislation. Because millions of individuals would give up their health insurance tax subsidies, JCT found that households earning up to $40,000 a year would face an ever-larger tax hike equal to $6.4 billion in 2021 alone (or a $4.4 billion tax hike once the effect of the corporate tax cut is considered).

Republicans say, in essence, “No harm, no foul.” If people are voluntarily dropping coverage, that hardly amounts to a tax increase. Yet the GOP argument that people would be giving up coverage they don’t want, while technically true, depends on a flawed presumption that all those millions of people with modest incomes would reject health insurance, not because of a lack of affordability, but because they would prefer to be uninsured.

No Subsidies Left Behind

Just consider a scenario in which people were able to use their available health insurance subsidy to cover the full cost of a high-deductible or catastrophic health insurance policy and have at least $200 left over for a Health Savings Account deposit — $100 of which could be cashed out if left unspent at year end.

If there were this kind of flexible option that included free cash on the table, the word would get out and there likely wouldn’t even be any need for advertising to get close to 100% enrollment among the subsidy-eligible group.

While this hypothetical isn’t necessarily an ideal model, it is eminently possible to combine the health care security Democrats insist upon with the freedom that Republicans believe in, killing the mandate while dramatically reducing premiums and continuing to provide moderate-income households ample reason to get covered instead of rolling the dice.

The key point is that every dollar of the projected savings from killing the individual mandate depends on keeping ObamaCare just as consumer unfriendly as it was in 2017. In other words, taking those savings – all that extra tax revenue lying around because even more people leave their health insurance tax credits unclaimed — and applying it to tax cuts means that a significant chunk of the funding now available for health insurance premium tax credits will essentially disappear, all but ruling out consumer-friendly and coverage-increasing reforms of the ACA in a fiscally fraught future.

Talking The Talk

In fact, the Congressional Budget Office says that killing the individual mandate by itself would hike premiums by 10%, causing even deeper affordability problems for households that are ineligible for ACA subsidies, mainly because they earn more than 400% of the poverty level.

Keep in mind that Republicans’ self-professed goal in seeking to repeal and replace the ACA was to make health insurance options more user-friendly. For years, Republicans have discussed giving people the option to buy coverage that is no more expensive than the tax credit available to pay for it, using any left-over portion of the credit to deposit in a Health Savings Account. Some of the GOP’s leading lights on health care have gone further to propose automatically enrolling the uninsured in such plans.

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Yet Republicans never put those kinds of health care fixes on the table this year, because giving people insurance options that they can afford means that more people might use their tax credits to buy coverage, and that would come at an inconvenient budgetary cost. In fact, the Congressional Budget Office concluded that the GOP Better Care Reconciliation Act, which nearly passed this summer, offered options so unattractive that “few low-income people would purchase any plan,” despite being eligible for tax credits.

Problems Worth Fixing

From a broad perspective, it’s useful to consider that ACA exchange subsidies in 2017 cost $46 billion vs. the $71 billion projected in 2015, with disappointing enrollment a prime explanation.

Affordability issues, including deductibles of up to $7,000 or more for the cheapest bronze plans, are by far the biggest reason why nearly 8 million people who remain uninsured didn’t use their available tax credit, according to the Kaiser Family Foundation.

Another 3.7 million full-time workers who are uninsured don’t qualify for ACA tax credits because their employer offers coverage. Yet under ACA rules, employers are allowed to offer high-deductible, bronze-type coverage that costs a worker close to 10% of income — nearly $2,000 for a worker earning $20,000. That’s nearly 10 times the cost of a subsidized bronze plan on the exchanges this year for someone at that income level.

Killing the employer mandate would make these millions of modest-wage, full-time workers who were thrown under the bus by ObamaCare eligible for individual market subsidies, but that would come at a cost. CBO says that eliminating employer mandate penalties would, by itself, cost $170 billion in tax revenue over a decade. If the GOP kills the individual mandate separately, instead of killing off both mandates simultaneously, the employer mandate will likely be around for the foreseeable future.

Those ACA employer coverage rules hurt not only hurt full-time workers, but entire families. Because of what is known as the family glitch, spouses and children of workers with a compliant offer of employer coverage also are denied subsidies to buy coverage on the insurance exchanges.

In addition, about 3 million people who are ineligible for ACA subsidies because they earn more than 400% of the poverty level are uninsured, as are 2.4 million who earn too little to qualify for exchange subsidies and live in states that didn’t expand Medicaid.

Having a robust nongroup market for insurance that serves people well should be a priority for the nation. The dynamism of our economy will be better served if entrepreneurs and idealists who are willing to step out on a limb don’t have to fear that their health insurance support will come crashing down. Demographic changes make it increasingly important for people to have the flexibility to step back from full-time work to help care for an aging parent or a sick child. Amid minimum-wage pressures and health care mandates, ultra-competitive markets and the advance of technology threaten to widen the cracks in our employer-centric insurance system that millions of workers, many with modest wages, are already falling into. And don’t forget that we’re entering the ninth year of an economic expansion. When the next recession hits, all of these pressures will multiply and millions more people will depend on insurance outside the employer system.


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Originally posted 2017-11-28 14:07:26.


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