ACA without a mandate
It appears almost certain that the ACA (Obamacare) mandate will be eliminated. This actually means that Obamacare will correspond to Obama’s 2008 proposal which didn’t include a mandate. Obama claimed it would work (he was lying or, to be polite, playing 11 dimensional chess).
Can ACA without a mandate work at all ? Can it be modiefied so that it works better ?
People who know a hell of a lot more than I do about health economics have struggled with these questions, so I doubt this post is useful. But I will type it anyway.
This excellent post by the always excellent Sarah Kliff explains.
First the CBO forecasts that removing the mandate will cause roughly 13 million more people to be uninsured. This means that they forecast that some people will still buy insurance on the exchanges — that there won’t be a complete death spiral. I am even more optimistic. The CBO’s forecasts of the number of uninsured Americans have been excellent, so I fear their forecast is better than my guess. The CBO forecasts 5 million fewer people will get Medicaid and 8 million fewer will buy insurance on the exchanges.
The effect on Medicaid enrollment shows the CBOs confidence in behavioral economics. Those 5 million don’t have to pay for Medicaid, but they forecast that without the push from the mandate, they won’t check and find out that they are eligible.
The 8 million would be roughly 40% of the numbe of plans purchased on the individual market (which still includes millions bought directly from insurance companies and not on the exchanges).
How can the individual market survive at all with guaranteed issue, community rating, and no madate ?
One might fear an adverse selection death spiral where only sick people get insurance so premiums are very high so only very sick people get insurance etc.
The spiral will be stopped for people with income under 4 times the poverty line who purchase insurance on the exchanges. They get subsidies so the amount they pay is a fixed function of their income and does not depend on the amount insurance companies charge. There will be only one loop of the spiral — healthy people don’t get insurance so premiums go up, but so do subsidies, so medium healthy people still get insurance.
It is possible that ACA without a mandate will destroy the direct from insurance companies individual market and will cause people with income over 4 times the poverty line to go uninsured. Also many people eligible for subsidies will be scared off by the premiums before they check and find they won’t pay them.
How could these consequences of GOP insanity be prevented or, at least, ameliorated ?
First there will be part of the same surprising effect of Trump’s previous attempt at sabotage — refusing to pay insurance companies for the cost sharing reductions they are required to make to reduce deductibles for people who have income less than 2.5 times the poverty rate who buy silver plans. Trump’s action caused extremely high silver premiums. Subsidies are linked to silver premiums. In many counties people can get bronze quality insurance for free. I’m pretty sure adverse selection must make silver premiums increase more than bronze premiums (with better insurance, the insurance company bears more of the additional cost from a sick policy holder). So the latest sabotage effort might cause the post subsidy cost of bronze insurance to go down. I hope this is an important effect. I think the end of Federal subsidies for cost sharing reductions may have strenthened Obamacare (in the short run, it probably hurt, because many peope don’t know that insurance companies still have to pay the cost sharing reductions, and now there won’t be a long run).
Importantly something probably will be done to undo the damage, because powerful entities will suffer. Obviously insurance companies will lose customers. Of course it is very much in their interest to try to convince healthy people to get insurance (it always has been). Also hospitals will go broke. Importantly, the GOP did not restore the program which paid hospitals which provided a lot of uncompensated care (it costs money). It was cut by the ACA, because it was assumed there would be much less need for it. This is already causing huge problems for rural hospitals in states which didn’t expand Medicaid. Hospitals might step up efforts to get people insured. But most importantly state governments will have a compelling reason to try to deal with the problem.
State governments end up paying for uncompensated care. They can protect themselve from Republicans in congress in many ways. First the remaining 19 states can expand Medicaid. It is insane not to. If Republicans are held responsible for Obmamacare without a mandate, the political incentive to refuse to expand Medicaid to stick it to Obmama is eliminated. I think the dread tax and sabotage ACA bill will cause states to expand Medicaid. Of course I can’t believe so many haven’t and that voters didn’t punish them.
Blue states could impose their own individual mandate. I doubt many will, because it is unpopular, but a bad enough effect of eliminating it might convince voters that it is necessary.
Finally, State and local government try to get the people who seek other services insured. If there are huge premiums and huge federal subsidies, the incentive to do this becomes stronger. I think one place to do this is unemployment offices. Newly unemployed people can buy Obamacare outside of open-enrollment periods. They tend to have low incomes. Similarly the state can contact people in divorce court. Again they are allowed to purchase outside of open enrollment. They will need to rearrange health insurance along with everything else. At least a terminal for bored people waiting at the DMV to check if they can get free insurance makes sense. People spend a lot of time waiting in state offices (after taking a number). A reminder that they might be going without free insurance (and a terminal) might be the nudge they need.
I think a lot can be done to undo the damage Republicans in Congress are doing. I fear it won’t be, but I am sure it can be.
The greatest impact will come in the individuals market >400% FPL. They were the ones doing the most complaining of the mandate. There will be some fall out between 300 and 400%.
Medicaid people will just not apply as they will not believe they are eligible.
Premiums go up, subsidies go up. Hard to imagine there is a net gain from people not signing up in the individuals market if healthy.
“They’d have to be insane not to expand Medicaid.” They’ve already demonstrated their insanity.