It’s official: the individual mandate is going away. After failing to kill Obamacare earlier this year, Republicans in Washington found a way to weaken it through the GOP tax bill that passed the Senate and the House on Wednesday.
The GOP tax bill eliminates the individual mandate penalty for not having health insurance starting in 2019. The Senate passed the bill early Wednesday morning and the House re-voted on the bill on Wednesday afternoon following a procedural snafu, known as breaking the Byrd Rule, on Tuesday. President Donald Trump is expected to sign the bill into law before Christmas.
The sweeping, $1.5 trillion tax-cut package represents Trump’s first big legislative achievement for the year. Republicans previously failed to repeal and replace the Affordable Care Act, otherwise known as Obamacare.
Under Obamacare, consumers must buy insurance or pay a penalty unless they qualify for a limited number of exemptions. Most Americans get insurance through their employers or through the government in the form of Medicare or Medicaid. But everyone else must actively seek out coverage in order to comply with Obamacare’s individual mandate; in 2016, about 7% of Americans acquired coverage via the individual insurance market, while another 9% were uninsured, according to the Kaiser Family Foundation.
It is worth noting that Obamacare’s individual mandate penalty remains in effect for 2018. The penalty for going uncovered for 2018 will be the same as this year: $695 per adult or 2.5% of household income in excess of tax filing thresholds, whichever is higher.
Eliminating Obamacare’s individual mandate penalty—something that was in the Senate version of the tax bill, but not the House tax bill—will have significant public health consequences, experts predict.
The individual mandate was created as a way to stabilize the non-group insurance market. Obamacare prohibits insurers from charging sicker consumers more for health insurance, or denying them coverage altogether. But in order to insure people with pre-existing conditions at the same rates as healthy people of the same age, insurers need plenty of healthy consumers—those who pay premiums but don’t use much care—to subsidize the sick.
If healthy people drop out of the market because they are no longer mandated to have coverage, insurers would need to raise their rates to cover the remaining, sicker customer base. The roughly 85% of marketplace customers who qualify for the government’s premium subsidies won’t feel the brunt of these premium increases, because the GOP tax bill doesn’t affect the subsidy structure. But the remainder—those who make too much to qualify for assistance—could find themselves priced out of the market.
What’s more, insurers could choose to exit the market altogether rather than face an unpredictable customer pool, leaving consumers with fewer choices.
The nonpartisan Congressional Budget Office estimates that if Obamacare’s individual mandate is repealed starting in 2019, there would be 4 million more people without health insurance in 2019; eight years later, in 2027, there would be 13 million more uninsured.
Technically, the GOP tax bill doesn’t actually repeal the individual mandate under Obamacare, says Sabrina Corlette, research professor at the Center on Health Insurance Reforms at the Georgetown University Health Policy Institute; it simply reduces the penalty for going uncovered to zero. But in practice, Corlette notes, eliminating the individual mandate penalty will have the same result as eliminating the individual mandate altogether.