A requiem for the individual mandate

I hope you held your 1095 form close when you filed your taxes this year because it is not long for this world.

Obamacare’s individual mandate will soon be dead. Republicans have killed it.

When the Affordable Care Act passed in 2010, no provision was more reviled than the law’s requirement that every American who does not buy health insurance pay a penalty. It was the foundation of the conservative constitutional challenge to the law, a case they very nearly won at the Supreme Court.

This idea was never all that popular with the public either. So many individual pieces of Obamacare polled very well — federal subsidies for private coverage, the expansion of Medicaid, eliminating preexisting conditions — but the mandate was woefully underwater.

Maybe worst of all: It didn’t really work. The mandate was billed as an unfortunate necessity. If you were going to force insurers to cover everybody, then you needed the mandate. It would bring in healthy people to offset the costs of covering the sick. But whatever the reason — maybe the subsidies (the carrot) weren’t generous enough, maybe the penalty (the stick) wasn’t harsh enough — that didn’t really happen. Somewhere around 6 million people elected to pay the penalty rather than buy insurance, and both the Obama and the Trump administrations doled out plenty of exemptions.

The mandate was a failed policy experiment, and its failures in a way mirror how the ACA has fallen short of what it was hoped to be, even if the law has undeniably had its successes. Next year, while the rest of the law remains, the mandate will simply vanish.

What a fitting end.

The mandate was Obamacare’s original sin for Republicans

The individual mandate had actually emerged decades earlier in the right-leaning think tank world as a market-based means to achieve universal coverage.

But conservatives quickly turned against it after Democrats adopted it. It was an affront to personal freedom: big-government liberals forcing Americans to buy something they might not want or need. Nothing better symbolized the federal overreach in the Democrats’ health care plan.

“Obamacare is a job-killer, and our economy simply cannot afford this unprecedented, unconstitutional power grab by the federal government,” then-House Speaker John Boehner said in 2010, a few months after the law was signed by Obama, as he was supporting a legal challenge to overturn the mandate and, with it, the whole law.

The mandate was the core of the GOP’s lawsuits to invalidate Obamacare before it could ever really take effect. Conservative attorneys argued that the Constitution barred the federal government from requiring Americans to purchase any commercial product, as the mandate did.

They also said, using the law’s own logic against it, that if the mandate was unconstitutional then the entire law was illegal. They urged the Supreme Court to overturn the mandate and the entire Affordable Care Act alongside it in 2012. It was an existential issue for some of the conservatives pushing the lawsuits.

“There was more at stake than Obamacare. All future purchase mandates were at stake,” Randy Barnett, a Georgetown University law professor who helped craft the case, told me last year when I asked him to go back to the moment of the Court’s ruling.

But Chief Justice John Roberts disagreed — at least in part. While Roberts sided with conservatives in ruling that the government couldn’t require people to purchase something in isolation, he upheld the mandate because he said its penalty was an allowable use of the taxing power granted to Congress by the Constitution.

Maybe Congress couldn’t require you to buy something, but they could tax you if you didn’t, in other words. Whatever the legal minutiae, the mandate survived the Supreme Court by the narrowest and unlikeliest of margins. For a time, anyway.

But when Republicans took control of Congress and the White House last year, there was perhaps no safer bet than the GOP ending the hated mandate. They stumbled at first, when the Senate failed to pass a more sweeping Obamacare repeal bill. But they stuck the repeal of the mandate into their tax bill — it actually, for technical reasons, helped pay for the tax cuts for corporations and the wealthy — and Congress passed it in December. In 2019, the mandate would end for good.

“When the individual mandate is being repealed, that means Obamacare is being repealed,” Trump said at the time. “Obamacare has been repealed in this bill.”

Well, that’s not quite right. But you could forgive Trump for thinking so.

The mandate was supposed to be essential to Obamacare

Barack Obama opposed a requirement that all Americans purchase coverage while he was running for president. Democrats knew this wasn’t going to be a popular idea.

But Obama eventually came around, convinced the mandate was crucial to creating a properly functioning health insurance market.

Health care wonks compare the Affordable Care Act’s health insurance markets to a “three-legged stool.” Three key policies work in tandem to expand coverage at an affordable price.

The first leg of the stool is ending preexisting conditions and allowing all people, sick or healthy, to buy insurance at the same price.

But it also wasn’t thought to work as a standalone policy. Mandating that insurers accept all customers would likely mean only the sicker patients — people who expect to use lots of health care — would sign up. Healthier people would just skip the market, figuring they’d do better not paying premiums and just buying health care when they need it.

This was where the second leg of the stool came in: the individual mandate. The requirement to purchase insurance was meant to ensure that sick and healthy people sign up for coverage. The mandate was supposed to help reduce premiums by nudging healthy people who are cheaper to cover into the market.

The third leg of the stool was the subsidies designed to make insurance affordable. If there is a requirement to buy insurance, Obamacare’s drafters reasoned, then it needs to be affordable for all Americans. This is how the health care law ended up with a sliding scale of subsidies, with more help given to the lowest-income enrollees.

The idea was to create a fine that wasn’t quite as expensive as purchasing insurance but was high enough that it would make consumers think twice about skipping coverage. The fine started lower — $395 or 1 percent of income, whichever was higher — in 2014 increasing to $695 or 2.5 percent of income in 2016, where it was intended to stay.

But the ACA’s penalty wasn’t nearly as harsh as those imposed in other countries. As Princeton University’s Uwe Reinhardt told Vox’s Sarah Kliff in 2016:

But the mandate didn’t really work — and Obamacare will probably be fine

It worked out as you’d expect. In 2016, 6.5 million Americans paid an average fine of $70 for not being covered the year before. Along the way, the Obama administration expanded the exemptions people could claim to avoid the mandate.

The Trump administration is building on its predecessors’ work for the mandate’s final year, ruling that people who live in counties with only one Obamacare insurer or people who are opposed to abortion and only have plans that cover abortions available to them do not have to pay the penalty for 2018.

Ending the mandate is going to increase premiums: Dave Dillon, a fellow of the Society of Actuaries, estimates health plans will tack on another 2.5 to 7.5 percent increase to make up for the loss of the mandate in 2019.

But the truth is most health policy experts had already come to believe the mandate wasn’t really working as intended. It was probably a combination of two factors: The penalty itself wasn’t big enough to compel people to buy health insurance, and the subsidies that people received from the federal government to buy coverage weren’t generous enough to draw more of them in either.

“A stronger individual mandate and bigger and broader premium subsidies would have made the ACA more successful,” Larry Levitt, senior vice president at the Kaiser Family Foundation, told me in October. “Of course, there are always trade-offs. Bigger premium subsidies would have required bigger tax increases.”

Yet Obamacare, the imperfect product that it is, isn’t going to collapse without the mandate. The law has proved rather resilient under Trump: Nearly as many people signed up for coverage for 2018 as did for 2017. The subsidies deserve the credit: For people with lower incomes, they help make insurance genuinely affordable or even free.

That won’t change when the mandate goes away. Even if insurers raise their premiums, the subsidies will protect the people who receive them from those hikes.

So Obamacare is likely to keep its market of 10 million or so customers. The mandate will retreat to the annals of history, while federal tax credits, Medicaid expansion, and the end of preexisting conditions become even more embedded in the fabric of our safety net.

A failed experiment comes to an end.

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