The Individual Mandate’s Dead. What Happens Next?

The demise of the ACA individual mandate, along with Trump’s and Republicans’ efforts to repeal Obamacare in 2017, will trigger in election year 2018 a new phase of the long-running, bitter battle over the fate of ACA, the insurance marketplaces, and the direction of health reform in general.

Surprisingly, the Democrats appear to have the upper hand for the moment.   Republican efforts to repeal the ACA in 2017 were deeply unpopular—only about 20 percent of the U.S. population supported them. Independents and moderate Republicans, in Congress and among voters, were notably opposed. And in the Senate, moderates killed the various ACA repeal bills (albeit by narrow margins).

The Republican tax bill is also unpopular.

Recent special election results in Virginia and Alabama—put Republicans off-balance and on-notice as well. In particular, the Alabama result bends the vote math in the Senate against any repeat ACA repeal efforts in 2018, and very likely beyond.

But, perhaps most surprising, the resurgence of interest in “coverage for all,” universal coverage, and “health care as a right” that started with Bernie Sander’s campaign in 2016 has continued to gain traction, even among some conservatives.

Are we seeing the turn of the screw?   If so, will this be a fast-moving cultural shift, like the acceptance of gay marriage? Or is it on the slow track, like the civil rights movement and equal pay for women? Given the fractious health care debate, the money involved, and philosophical divide, I tend to think it’s the latter. But there’s no doubt a shift is going on.

In this context, revelations in the new book Fire and Fury are notable: Trump apparently has been secretly skeptical of ACA repeal and has asked staff “Why can’t we just do Medicare for all.” Not incidentally, Trump put the kibosh on Republican plans to reform Medicare and Medicaid in 2018. (After a Camp David strategy retreat over the Jan 6-7 weekend, Republicans leaders appeared to agree.)

At the end of this blog is a brief list of emerging Democratic ideas and proposed legislation that would take us in the expanded- and universal-coverage direction, largely via Medicare and/or Medicaid expansions. These proposals won’t go anywhere in 2018 but they will be a part of election-year discussions, and possibly lay the foundation for a quite different kind of health care debate come 2019-20-21.

But first, there are immediate structural and policy issues that have been triggered by the mandate’s demise.   While that new law doesn’t kill the mandate until 2019, the effects will begin to show up in early summer 2018 when insurers must start making decisions about participating in the exchanges next year.

As of this writing, it’s not clear if Congress is going to pass two bills that aim to shore-up the exchanges in the wake of the mandate’s end.   One bill would restore for two years the CSR (cost-sharing reduction) payments that Trump killed last fall, and allow states more flexibility in regulating the operation of exchanges.

The other bill would create a 2-year $10 billion reinsurance fund to help states cover high-cost patients—via the exchanges or in newly created high-risk pools.

Both bills are being debated as possible components of the federal budget deal that must be reached over the next month or so. Senate Leader McConnell says he plans to honor his pledge to Susan Collins (R-Maine) to adopt the measures. (Her vote for the tax bill was contingent on this.)   But House Republicans have signaled loud and clear that they don’t want to “bail out the insurance companies” or “fix” the exchanges in any way.

This is a scorched earth position—shocking given the harm that will cause in their states.  If they hold to this line, the Dems will mercilessly beat up on them about it during the campaigns this year.

But, oddly, for now, the Dems are sanguine about the two bills (and even the mandate’s fate). That’s largely because of the counterintuitive result that occurred during exchange enrollment for 2018.   Namely, Trump’s nix of the CSR payments backfired. Increased premiums due to Trump’s action of the CSR payments triggered increased subsidies (and more government spending!), and exchanges manipulated the system to allow (and even push) more people into better, higher tier coverage.

That’s one reason exchange enrollment stayed on course for 2018, with minor fall-off.

Authorizing the CSR payments would, thus, reduce subsidies in 2019 and force plan switches by millions of people in 2019. The whole complex issue surrounding CSRs arguably needs more thought.

As for the fate of individual mandate, Kaiser Family Foundation’s Larry Levitt—ever insightful—told The Washington Post recently that the mandate’s termination at the federal level could end up being a “blessing in disguise.”

Why? (1) It removes this much-hated (by Rs) provision from public scorn and the general debate around the ACA  (2) It will allow a real-world test of whether the mandate made all much difference in getting people to enroll in the exchanges, or whether the subsidies are the chief motivator.

Related, the CBO is scheduled to release a new examination of that issue in coming weeks. Analysts expect the agency to (perhaps significantly) revise downward their previous estimate that 4 million people in 2019 and 13 million over the next decade would lose coverage absent the mandate.

States can enact an individual mandate

Meanwhile, it looks like a bunch of blue states are going to enact (or try anyway) their own individual mandates during the 2018 state legislative season (January to June for most states.) The policy would be the same: sign-up during an annual open enrollment period each fall or incur some kind of a penalty.

Massachusetts has an individual mandate that predates the ACA; it’s credited with contributing to that state’s successful achievement of near universal coverage. Maryland lawmakers became the first to unveil an individual mandate plan this week (Jan 9). It’s paired with an automatic enrollment plan and is innovative: the plan would charge a fee to people in the state who do not have insurance.   But it would allow people to choose to use that fee instead as a down-payment on exchange coverage. Alternatively, they could pay the fee. All without coverage could receive counseling on their options.

Several private groups and reform advocates are working on model state individual mandate laws.

If insurers start to signal in June and July that they intend to drop out of more exchanges for 2019—participation is already way down compared to 2016 and 2017—Congress will likely be forced into a conversation about alternatives to the mandate, to preserve access to coverage.

One major mandate alternative idea Republicans have pitched in the past is to impose a premium surcharge on those who enroll late. Medicare has such a surcharge and it’s nasty. Failing to sign-up upon eligibility for Part B results in a 10 percent premium surcharge for each full 12-month period the beneficiary was not enrolled—for the entire length of an individual’s enrollment in Medicare!

Other proposals:

  • A requirement to have continuous coverage, or pay a premium surcharge
  • Limited plan choice—restricting the number or types of plans available to an individual enrolling late or after a gap in coverage.
  • Reduced subsidies—for late enrollment or after a period of time without insurance that exceeds 60 days.
  • Auto-enrollment—of everyone who does not sign up but then allowing them to opt-out. (Otherwise, it’s essentially the same as a mandate and raises significant government “big brother” issues). This presumably would be combined with a penalty for late enrollment.


My own strong view is that Congress should enact the $10 billion reinsurance program as part of the FY 2018 budget bill.   This should be a no-brainer.   It’s a bipartisan concept; Medicare Part D operates with a permanent reinsurance program.   And reinsurance is a well-known insurance industry tool.

The Trump administration in March invited states to apply for a waiver to set up reinsurance pools, under an existing ACA program (Section 1332). In fact, a reinsurance pool existed under the ACA from 2014 to 2016 and helped constrain premium increases by 5 to 10 percent. The program then lapsed per a provision in the ACA. It’s time to bring it back.

Three states have enacted their own reinsurance programs: Alaska, Minnesota, and Oregon.   All have federal waivers for the programs. Alaska’s program lowered premium increases from 42 percent to just 7 percent in 2017.

The $10 billion needs to be combined with measures that make it easier for states to apply for and win the waivers. Such measures are a part of the proposed legislation.

Stop Trump’s sabotage

The Trump administration is moving ahead with plans to expand association health plans and prolong the period—possible up to a year—in which people can buy so-called “short-term” health insurance that do not meet ACA requirements.

Both these initiatives—part of Trump executive orders—will undermine the exchanges and are bad policy. Draft rules on association health plans were issued this month. It’s not clear how they will look after the 60-day comment period; opposition is strong.  Blue states may seek to block association health plans. The draft rules on short-term plans are due any day.

Alex Azar will soon take the reins at HHS. Trump and the Republicans are hoping he’ll be an effective promoter and enforcer of conservative health policy—and use the power of HHS to undermine the ACA.   But I’ll bet he won’t support policies that reduce coverage and lead to more government spending at the same time (as Trump’s CSR action did).

What the Dems are proposing

Here, in brief, are some of the ideas percolating up from newly emboldened Democrats (courtesy of a nice list in a Jan. 8 AP story). The left-leaning Century Foundation has also recently published a series of thoughtful analyses by leading health policy experts—all casting an eye toward the future. You can find them here.   https://tcf.org/publications/

Medicare for All.   Bernie Sanders is still pushing for this but state-level attempts to enact single-payer have foundered or stalled, primarily because of the large tax increases needed.   Still, one-third of Sanders’ Democratic colleagues in the Senate are co-sponsoring his latest bill.

Medicare-X. Senators Tim Kaine and Michael Bennet (Colo) would allow individuals in states and communities lacking insurer competition to buy into a new public plan. Medicare-X would be available as an option through HealthCare.gov and state health insurance markets. Enrollees could receive financial assistance for premiums and copays through the ACA.

Medicare Part E. Yale University political scientist Jacob Hacker has proposed this. People of all ages who don’t have access to job-based coverage would be able to enroll. It would be financed partly with taxes on companies that don’t provide insurance. Consumers would pay income-based premiums. Hospitals and doctors would be reimbursed based on Medicare rates.

Medicare at 55: Sen. Debbie Stabenow (Mich.) has introduced a bill that would let older adults buy into Medicare (including Med Advantage plans) starting at age 55. Enrollees would be eligible for subsidies under Obama’s law.

Medicaid Buy-In. Sen. Brian Schatz (Hawaii) and Rep. Ben Ray Lujan (N.M.) have introduced legislation to allow states to open their Medicaid programs up to people willing to pay premiums.

Steven Findlay is an independent health policy analyst and journalist

6 replies »

  1. Barry – Good points and all ideas worthy of consideration. Thanks.

  2. Thanks for the opportunity to clarify that, as the piece itself says, the mandate is still the law and operable in 2018. Also, technically, the tax bill did not outright repeal the mandate starting on Jan 1, 2019. Instead, It ended the penalties for not having health insurance. So, it’s feasible that Congress could come back at a later time and reimpose penalties. Said another way: the mandate itself is still in the ACA, which is still the law. Just no penalties, as were defined in the ACA.

    The strong conventional wisdom is that the penalties will not be re-imposed anytime soon, certainly not during the Trump administration. And maybe even beyond that. It all depends on what occurs over the next 3 to 4 years–what policies the administration seeks to replace the mandate, what happens with ACA marketplaces and enrollment and premiums this year and in 2019,, whether states adopt their now mandates or experiment with other means of getting people to enroll and stay enrolled. Etc.

  3. The correct headline would be: The Individual Mandate is Dead.*

    * DISCLAIMER: We’re not sure what this means yet. In fact we’re not even sure if it’s actually dead. We guess it depends on how you define “dead.” Dead as in totally dead? Presumed dead? In seriously deep shit?

  4. via Tweetbot

    I know you’re just doing the header here, but shouldn’t there be a disclaimer that it’s still in effect for *this* year?

  5. Here are a couple of additional ideas that weren’t on anyone’s list. First, expand the maximum age rating band from 3 to 1 to 5 to 1. A 5 to 1 ratio would allow young people to buy health insurance policies for a premium that reflects their own actuarial risk at least at the population level. At the same time, remove the cliff phaseout for subsidies which is currently 400% of FPL income. It doesn’t make sense for one to receive a significant premium subsidy at 400% of FPL income but get nothing at 401%. Uncap it to ensure that nobody pays more than 10% of modified adjusted gross income (MAGI as defined by Medicare) in health insurance premiums for a silver level plan.

    It will cost somewhat more money in subsidies to remove the income cap but more young people are likely to buy insurance coverage if they are not forced to subsidize older and sicker people if we increase the maximum age rating band to 5 to 1. The good news is that that cost growth continues to slow for both Medicare and Medicaid. For the first three months of fiscal 2018, the CBO reports that Medicare spending net of beneficiary premiums and other offsetting receipts grew only 1% year-to-year adjusted for payment timing differences and the federal share of Medicaid spending actually declined 1.7%. If the exchanges are devolving into de facto high risk pools anyway, which they are, I think this is a better approach than $10 billion to help pay for explicit high risk pools which could easily prove to be grossly inadequate.

    I note that in Germany, required social insurance “contributions” are 15% of income a good portion of which is nominally paid by employers but really paid by employees in the form of lower wages than would otherwise be paid but the total amount is capped at €800 per month with young and old paying / contributing at the same rate. In Switzerland, at least according to the late Uwe Reinhardt, their mandate to purchase insurance is very tough. If you don’t buy coverage, they will find out, make you buy it and garnish your wages to pay for it. I doubt that America is ready for that level of coercion.