The Individual Mandate
Obamacare's Unpopular, Pivotal Point
Since the Affordable Care Act was passed in 2010, the individual mandate has been its least popular part. Now, President-elect Donald Trump and his Republican allies in Congress are getting set to repeal the law, often called Obamacare, and the mandate, the law’s requirement that all Americans purchase health insurance or pay a fine. What’s not clear is how soon the mandate will actually go away and what might take its place. Obamacare supporters see it as necessary to keep the law’s insurance markets functioning. Without it, they say, many healthy people would forego insurance, driving up the cost of coverage. That would make it a challenge to keep one of Obamacare’s most popular features: its requirement that insurers not exclude or penalize people for any previous or current illness. Republicans say they can achieve the same effects in a less coercive way.
In December, U.S. health insurers said they were open to the Republican idea of replacing the individual mandate with a “continuous coverage” provision. Under that plan, no one would be required to buy insurance. But anyone who let their coverage lapse could be charged higher premiums when they later applied for insurance, or be forced to wait before buying a health plan. There are plenty of details to iron out, from how much more individuals could be charged, to how the system would handle people who buy skimpy insurance when they’re healthy and want to upgrade to more comprehensive coverage when they fall ill. In the meantime, households that did not have coverage in 2016 could face a fine of up to $2,085 or 2.5 percent of family income, whichever is greater, when they file their taxes. About 6.5 million taxpayers paid a penalty for not having health insurance in 2015, down from 8 million the year before. The median fine was $330. About 11 million households claimed exemptions, for reasons ranging from a death in the family to domestic violence to being imprisoned.
Both the individual mandate and the continuous coverage proposal address the same problem. In fact, liberals like to point out that the individual mandate was originally a conservative notion, proposed in 1989 by the Heritage Foundation, and that it was a key part of the health-care reform adopted in Massachusetts in 2006 under Republican Gov. Mitt Romney. The idea was that without such a prod, any promise to guarantee coverage to those with pre-existing conditions would collapse in a “death spiral” as older, sicker enrollees push up premiums, leading ever more “young invincibles” to decide they can skip insurance, leading rates to rise even further. As a presidential candidate, Barack Obama opposed the individual mandate, then changed his mind as he prepared legislation in 2009. In 2012, four Supreme Court justices said that the mandate was justified under Congress’s power to regulate commerce and four called it unconstitutional. The deciding vote was cast by Chief Justice John Roberts, who upheld it not under the commerce clause but as part of Congress’s power to tax.
Republicans cast the legal assault on the mandate as a defense against government intrusion into private decisions: If a law could require you to buy insurance, they asked, what else could the government force you to buy? Democrats defended the mandate as reasonable regulation of a business that affects all Americans. But they recognized the unpopularity of the provision and made the penalties lower than some experts thought they needed to be and expanded exemptions to it. Many economists attribute some of the recent problems in the Obamacare health-insurance exchanges — rising premiums and a number of insurers pulling out — to the mandate’s failure to get enough healthy or young people to buy coverage. Whether those “invincibles” will be motivated by the threat of potentially higher premiums down the road is an open question, too.
The Reference Shelf
- Congressional Research Service report on the individual mandate.
- U.S. Internal Revenue Service question and answer page on the mandate.
- A chart from an insurance industry trade group, America’s Health Insurance Plans, on different estimates of the impact of dropping the mandate.
- Annotated excerpts from the opinions in the U.S. Supreme Court ruling on the Affordable Care Act.
- A compilation of pre-Obamacare calls for an individual mandate.
First published April 15, 2014
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