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CBO Blames Loss of Individual Mandate for Higher Uninsured Rate by 2028

In May, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) updated estimates for the number of non-institutionalized citizens under age 65 who will have health insurance between 2019 and 2028. The report indicated that, in several categories, health insurance enrollment would decline due to the elimination of the federal mandate requiring people to have health insurance. In addition, the report found that the elimination of the federal mandate could also lead to a rise in insurance premiums as healthier people choose not to have insurance, leaving fewer healthy people and more people with higher medical costs in the marketplace.

Projected Coverage

According to the report, 89 percent of those who are under the age of 65 and who aren’t institutionalized will have health insurance in 2018. The majority of those consumers will obtain coverage from employment-based plans and Medicaid. That number drops to 88 percent for 2019 and 2020, and to 87 percent for the remaining years up through 2028. Approximately 158 million people, or 58 percent, obtain health insurance through their employer. The report found that number would decline to 154 million, or about 55 percent, by 2028.

Nongroup coverage, which is a much smaller share of the marketplace and represents anyone not covered by a job-based plan, currently accounts for about 15 million consumers per month, with 9 million purchasing their healthcare from the ACA marketplace. The CBO estimates that this number will fall by 3 million in 2018 and 2019.

Individual Mandate Elimination

In January 2018, Congress passed the Tax Cuts and Jobs Act, which effectively ended the individual mandate that required everyone in the United States to have health insurance or face a tax penalty. Starting in 2019, there is no penalty for those who do not have health insurance coverage. The mandate was the most unpopular aspect of the ACA and it was a hot topic during the 2016 election, with Republicans vowing to not only repeal the mandate but to eliminate the ACA completely. Although lawmakers were unsuccessful in repealing the ACA, the tax bill was able to eliminate the mandate.

Impact on Health Insurance Numbers

According to the CBO and JCT report, a large percentage of those in the marketplace will lose coverage, either through voluntarily ditching their health plans due to the repeal of the individual mandate or because the resulting higher premiums from a sicker risk pool will force people with medical problems to drop their coverage.

By 2028, it’s expected that about 35 million Americans won’t have health insurance, compared to 29 million in 2018. This number is 3 million higher than predicted in September 2017, before the individual mandate was repealed.

Higher Premiums

The repeal of the individual mandate is also expected to cause a rise in healthcare premiums for benchmark marketplace plans by 15 percent. Overall, premiums are expected to increase by 7 percent each year between 2019 and 2028. The rise in premiums is expected due to healthier people leaving the marketplace, leaving a higher percentage of people with medical issues that require costlier medical care. Because insurance companies are required to cover individuals with pre-existing conditions, higher medical costs must be absorbed by increased premiums if healthier individuals aren’t there to offset these costs.

Lack of Options

Although the CBO report indicates that the marketplace will remain stable in 2019, there is some speculation that the elimination of the individual mandate could undermine the market. Currently, there are areas of the country where consumers in the marketplace have only one option for insurance. Should that insurer choose to leave the marketplace due to higher medical costs it can’t absorb, this could leave consumers with no options for health insurance. Some states may expand Medicaid eligibility under guidelines from the Affordable Care Act, which would help consumers obtain insurance. However, health experts also theorize that some states will push for short-term, non-ACA compliant policies, which could further undermine the major medical marketplace.

Although the individual mandate was unpopular regardless of political leaning, it was put in place to encourage healthier people to purchase health insurance so that their premiums could offset the costs of medical treatments for people with health problems. The CBO and JCT report indicates that elimination of the mandate may further reduce the number of people who have health insurance and could have a negative impact on premiums as well.

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