Why Obamacare’s individual mandate isn’t going away (for now)
The Affordable Care Act’s individual mandate is back in the headlines, and this time it’s linked to Obamacare’s troubled website. But don’t look for the controversial insurance requirement to go away anytime soon.
On Wednesday night, the White House issued a ruling that clarified some confusion over the last day consumers could sign up for a health care plan, or pay a fine on their taxes (unless, of course, they can prove a hardship or another factor to avoid the mandate).
That deadline is now March 31, 2014. Previously, the Obama administration had said consumers had to sign up by February 15, to allow for a six-week period to make the coverage active under the health care exchanges set up by the ACA.
Officially, the White House said it was just clearing up some confusion about the two dates.
“The individual mandate timing has not changed. The deadline for signing up for insurance is March 31. It was true this a.m. It is true tonight,” said a spokeswoman for the Department of Health and Human Services.
Unofficially, many observers see the six-week delay, or clarification, as a direct response to the much-publicized troubles with healthcare.gov, the malfunctioning official website for Obamacare.
On Thursday, Congress held hearings into the website’s technical problems and the Obama administration’s oversight role in its failed launch. As fingers were pointed in various directions on Capitol Hill, there was growing talk of a longer delay for the individual mandate.
Democrat Joe Manchin, a senator from West Virginia, wants the individual mandate delayed for one year. Manchin told Fox News he would join with Senator Johnny Isakson, a Republican from Georgia, to sponsor a measure.
A similar measure is coming from Senator Marco Rubio to delay the mandate for at least six months after the Obamacare website is officially deemed fixed. And Democratic Senator Jeanne Shaheen has asked President Obama to delay the individual mandate for an unspecified period of time because of the website issues.
“If an individual is unable to purchase health insurance due to technical problems with enrollment, they should not be penalized because of lack of coverage,” she said in a public letter to the president.
But for now, cries for the individual mandate’s total elimination seem muted in Washington. That fight will most likely take place in the 2014 midterm and 2016 general elections. (The Supreme Court’s 2012 decision on the ACA famously left the mandate intact as a legally permissible tax.)
The individual mandate provisions say if an individual chooses not to carry health insurance, they are subject to a penalty, starting at $95 per person per year or 1 percent of income in 2014, whichever is greater. The penalty eventually reaches $695 per person or 2.5 percent of income by 2016.
For all its problems, the individual mandate is a critical part of the ACA, and its removal from the financial equation could make the large-scale Obamacare plan untenable.
Also coincidentally, many top CEOs of health insurance companies were in a White House meeting, behind closed doors, on Wednesday night, reportedly discussing the individual mandate and the website problems.
In theory, the individual mandate is a key part of the financial equation because it helps keep insurance premiums down by forcing more people, including younger, healthier people, to buy insurance. The influx of money from new policies offsets costs absorbed by insurers who now have to accept all people as customers, including those with pre-existing health conditions.
Without the mandate, premiums would rise for people who have insurance. How much they would rise was a point of contention during the 2012 debate over the individual mandate. The Congressional Budget Office estimated premiums would go up between 15 percent and 20 percent without the individual mandate. The Rand Corporation estimated premiums would only rise 2.4 percent without the individual mandate.
A January 2012 study from the Urban Institute, sponsored by the Robert Wood Johnson Foundation, looked at a third scenario: premium increases if the individual mandate was eliminated and if there were also problems that caused low enrollment in the insurance exchanges.
“There is a genuine risk that low initial exchange enrollment could start an adverse selection cycle,” the report said, putting insurance premium hikes at 20 or 25 percent in different scenarios.
Those hikes would force healthier people out of the system, and leave people with health problems to pay for the premium increases. But as the people remaining in the system face climbing premiums, they could also decide to go without insurance. This is the much-debated “death spiral” theory.
During the legal fight over the Affordable Care Act, attorneys for the Obama administration made the argument that the individual mandate was absolutely essential for the program to work.
Dan McLaughlin, a columnist at The Federalist, lays out another scenario about why the Obama administration wouldn’t consider an individual mandate delay, let alone ditching the mandate.
The individual mandate was one of three parts of the ACA that the Obama administration told the Supreme Court was essential to making the law work. The other two parts were the elimination of pre-existing conditions and a commitment to charge all people the same insurance rates.
A significant individual mandate delay, McLaughlin argues, would allow insurers to mount their own legal challenge to the law, using the Obama administration’s own argument from its Supreme Court filings.
“The Administration’s own legal arguments would provide a powerful argument for insurers that Congress never intended these provisions of the statute to be enforced against them while the mandate was not in effect,” he says.
For now, there are various estimates about how long it will take to fix the Obamacare website. If it is a matter of weeks, the ACA could proceed as expected. If it is much longer, the Obama administration could face a combination of policy, political, and legal challenges that would prove troublesome.
Scott Bomboy is the editor in chief of the National Constitution Center.
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