Sarah Kliff in the New York Times interviewed several health economists about the lack of a problem from a lack of a federal individual mandate:
Many experts now view the individual mandate as a policy that did little to increase health coverage — but did a lot to invite political backlash and legal challenges….
Obamacare’s insurance subsidies, via tax credits, brought more stability to the marketplace than originally expected. The credits are structured to keep premiums affordable for low and middle-income Americans even when the base price of insurance rises.
The theory behind the individual mandate in terms of enhancing Exchange enrollment was simple:
- Reduce the gap in the cost of being uninsured versus being insured
Let’s work within this framework. There are two ways to reduce the gap. The first is to raise the cost of being uninsured. The second is to lower the cost of being insured.
The price linked subsidy system that the ACA uses has an odd (and for me, a career defining) feature: more expensive premium levels aren’t necessarily a bad thing. Hell, they are a good thing for subsidized enrollees. This is especially true when the expensive premiums are for silver plans that set the subsidy benchmark.
The individual mandate penalty was set to zero in December 2017 for the 2019 policy year. At the same time, insurers had silver-loaded their premiums, to use a technical term, up the wazoo for the 2018 plan year.
Plans became way cheaper for people who received premium subsidies and did not buy silver plans. Subsidized individuals who bought silver plans saw no fundamental change in relative prices. Zero premium plans proliferated.
In this environment, it is not too surprising that the individual mandate’s existence, especially a fairly weak mandate, does not matter much. The price gap between being insured and being uninsured had shrunk; the shrinkage just came from the other direction.
Now what I would love to see would be a difference in difference approach between states that all consistently silver loaded but had variation on whether or not states adopted a state based individual mandate. I think that approach would give stronger evidence on the actual impact of the individual mandate as silver loading is a massive confounding factor in simplistic enrollment analysis.
Bob Hertz
Technically there have never been any “zero premium plans.” All insurers charge premiums on all policies. In fact, insurance premiums went up at 40% in this individual market after the ACA, due mainly to guaranteed issue.
What we did have larger subsidies for lower-income buyers, due to the subsidy formula and to the 2017 chaos after Trump cut off the CSR payments to insurers.
This did result in zero net premiums for buyers under about 200% of poverty in most states.
Overall you do great work, David, but I think you are giving the ACA too much credit for the ‘zero premium’ trend that was an accident.
Baud
@Bob Hertz:
I don’t understand your comment. The plans are zero premium to some consumers, which is the point of the post. Free college and M4A wouldn’t be “free” either.
And while this is not how Obama initially intended the ACA to work, the subsidies are a feature of the ACA. I don’t understand the point about it being an accident.
David Anderson
@Bob Hertz: I completely agree that Zero Premium is mostly incidental to market design, but it was a logical outcome of policy changes. And the relevant price, when analyzed from the perspective of the extensive margin ie the buy/no buy decision is the price exposed to the potential buyer, not the aggregate cost. And in that context zero premium is truly the relevant price.
cmorenc
The big potential legal problem for the ACA is not the repeal of the individual mandate, but Roberts’ crabbed, counter-precedental view of the federal commerce clause. since as part of the GOP’s 2017 tax grab bill they repealed the “tax” on individuals who failed to secure health insurance, which Roberts had pinned the ACA’s constitutionality upon in 1912 in National Federation of Independent Businesses v Sebelius. If the jive-5 (including Roberts) are inclined to now rule the ACA unconstitutional (in a pending case that won’t be decided until after the election) – while not at the same time hopelessly handicapping the federal government’s ability to deal with the COVID crisis – that’s going to require some spectacularly twisted gymnastics of constitutional (un)reasoning.
Of course, Alito and Thomas won’t give a shit about anything but pushing their fervid dreams of constitutional federal government minimalism and pseudo=”originality” – but hopefully Roberts and maybe Gorsuch will sensibly realize that in current circumstances, it’s practically untenable to overrule the ACA and still leave the federal government adequately clear room to address COVID, which unquestionably has disastrous effects on interstate commerce.
Sab
@Bob Hertz: I take your point. My income was too high for a subsidy, and my premium went up a lot. But what I got with the ACA was actual insurance in the individual market. Before what I had was pretend insurance, where I paid monthly premiums in order to get my foot in the door for routine medical care, knowing full well that if anything serious came up my minor pre-existing condition meant I was for practical purposes not insured.
Tlaloc
Am I missing something? I thought the point of the mandate was to address the “free rider” issue where an individual chooses to go uninsured until they develop a medical issue and then rely on guaranteed issue to pick up insurance just when they actually need it. That was always the rationale I read for it and it seems logical to me, though I admit this is not my field of specialization.
David Anderson
@cmorenc: I found the rulings in the Oklahoma Cherokee Indian case and the Risk Corridor case to be pretty damn clear — Congress can make major alterations to programs and screw people over but they have to be clear that is what they doing in big bold letters instead of doing so if you squint really hard and get stoned while reading the language.