The Individual Mandate

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Since the U.S. Congress passed the Affordable Care Act, the individual mandate has been its least popular part. Republicans have fought, so far unsuccessfully, to get rid of the mandate, a requirement that all Americans purchase health insurance or pay a fine. Obamacare supporters see it as necessary to keep the markets for individual health-insurance policies functioning. Without a mandate, 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 effect in a less coercive way. But their efforts to pass laws that put new mechanisms in place have foundered on internal divisions. 

The Situation

A bill passed by the House of Representatives in May would have replaced the individual mandate with a “continuous coverage” provision. Under that plan, no one would have been required to buy insurance, but anyone who let their coverage lapse could be charged higher premiums when they later applied for insurance. A Senate bill had a somewhat similar provision, but the measure failed when moderate Republicans upset about its deep cuts to Medicaid, the health-care program for low-income Americans, joined with Democrats.  Majority Leader Mitch McConnell then pushed a so-called skinny repeal bill whose central provision was removing the individual mandate. The Congressional Budget Office said the measure would increase the number of people without insurance by 15 million within a year. It failed by one vote. 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; the maximum was $2,085 or 2.5 percent of family income, whichever was greater. About 11 million households claimed exemptions, for reasons ranging from a death in the family to domestic violence to being imprisoned.

The Background

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 Governor 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.

The Argument

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. Even without passage of a repeal bill, many insurers say they are worried that the mandate may wither if U.S. President Donald Trump decides not to enforce it. Trump has said Republicans should wait for Obamacare to “implode” and then use its failure to force Democrats to rewrite the law.

The Reference Shelf

  • The Congressional Budget Office’s analysis of the House bill.
  • A 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

    To contact the writers of this QuickTake:
    Zachary Tracer in New York at ztracer1@bloomberg.net
    Caroline Chen in San Francisco at cchen509@bloomberg.net

    To contact the editor responsible for this QuickTake:
    John O'Neil at joneil18@bloomberg.net

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