The Senate tax bill includes changes in health care policy that would result in 13 million fewer Americans having health insurance and about a 10 percent increase in premiums for those buying insurance on the individual market. That’s the impact of eliminating the health insurance mandate. What’s it doing in the tax bill? Mandate repeal frees up more than $300 billion over the next decade – because when fewer people have health care coverage, the federal government spends less on things that make health care coverage more affordable, like premium tax credits, other cost-saving measures, and Medicaid. Policymakers have used that $300 billion to pay for tax cuts primarily for businesses and the wealthy.
Senator Susan Collins (R-ME) has reported that the Senate is expected to vote for other legislation to improve the individual insurance market, including the Alexander-Murray individual market reform legislation and Collins-Nelson reinsurance proposal. But these proposals would do little to reverse the coverage losses, premium increases, and disruption caused by the repeal of the individual mandate. And if policymakers succeed in enacting massive tax cuts, it will make it even harder to fund any additional legislation to improve access to affordable health care coverage.
Alexander-Murray legislation is a bipartisan compromise meant to reduce premiums and increase stability in the individual insurance market. Among other things, it would restore the “cost-sharing reduction” payments to insurers that pay for measures that reduce out-of-pocket costs. But Alexander-Murray was crafted for the health care environment that existed before the mandate repeal bombshell was dropped into the tax bill. Analysis by the Center on Budget and Policy Priorities finds that the combined impact of repealing the individual mandate and enacting Alexander-Murray would be about as harmful as repealing the individual mandate alone:
- 13 million Americans without health insurance. Alexander-Murray impacts the individual health insurance market, but the coverage losses from mandate repeal are in multiple areas: Medicaid, employer-based, and individual market.
- Premium increases in the individual market. In 2019, this combination of policy changes would likely result in small reductions in premiums for “silver” insurance plans and higher premiums for other plans purchased in the individual market. All plans would have higher premiums starting in 2020. Alexander-Murray would have no impact on the 10 percent projected premium increases that would result from the market pressures caused by repealing the individual mandate.
- Increased market instability. Alexander-Murray was designed to address the market instability caused when President Donald Trump said he would stop funding the cost-sharing reduction payments. But it won’t resolve the turmoil caused by mandate repeal, which is the equivalent of pulling out several bricks from the bottom of a Jenga tower, and could result in insurers leaving the individual market.
The Center on Budget and Policy Priorities similarly find that, the Collins-Nelson reinsurance proposal would have little real impact on the damage done by mandate repeal. This proposal would provide $2.3 billion annually in 2018 and 2019 to fund state reinsurance pools, which cover some or all of insurers’ costs for high-cost claims.
- The proposed reinsurance pool is too small to reverse rising premiums. It’s estimated that it would take roughly a $5 billion a year permanent reinsurance program to counter the 10 percent increase in premiums resulting from mandate repeal. The Collins-Nelson bill would provide less than half that amount, and for two years only.
- Little impact on market instability. It’s hard for a temporary program to address uncertainty about the future of the individual insurance market and overall health care landscape.
- Only a small reduction in the number losing health insurance coverage. Estimates are that a permanent reinsurance program of this size could increase coverage by fewer than 1 million; that’s only a small dent in the 13 million who are expected to lose coverage.
Some have downplayed the widespread coverage loss from mandate repeal – arguing that it’s just a matter of individual choice. But some of those who would lose coverage would do so because the ripple effects of the mandate repeal would make coverage unaffordable, not because they would prefer to go without health insurance.
Changes like Alexander-Murray and Collins-Nelson won’t substantially alter the fact that many everyday Americans would be made worse off than they are today by the combination of tax changes and lost health care funding. Combined with ongoing delays in renewing funding for the Children’s Health Insurance Program and looming threats to Medicare and Medicaid, this is a very bad omen for Americans’ access to affordable health care.