Individual Mandate Costs Explained
Scenario 2: Individual Mandate Struck Down
Meanwhile, a computer modeling study from RAND examined how the lack of an individual mandate would affect the number of people insured, premium costs in health insurance exchanges, and government spending on health coverage. Among the findings:
- Fewer people would be insured without the mandate. Under the ACA, with the individual mandate an estimated 252.2 million Americans will have health insurance coverage in 2016. Without the mandate, that number drops to 239.7 million.
- The effect on premiums would be minimal. Assuming that HIX survive, the lack of an individual mandate will have only a marginal affect on the cost of policies purchased through HIX. Taking into account the age of enrollees, it's estimated that premiums will increase by only 2.4%.
That's good news for HIX. According to the report, the premium increases will not be enough to "trigger catastrophic failure of the exchanges" because many enrollees will perceive "little or no change in their contribution even when premiums increase." That will reduce the chance of a "large scale exodus from the market."
The relative stability of the individual exchange market reflects federal exchange subsidies, which would keep some of the so-called young invincible in the market, and rate banding, which would provide some premium price stability even if older, sicker enrollees outnumber the younger, healthier members.
- The increase in total government spending would be modest. Without the individual mandate total government spending would increase by what the report terms is a "modest" $10 billion. The increase would be driven by higher premiums, the loss of revenue from mandate penalties, and increased spending on medical care for the uninsured.
- Taxpayer spending for newly insured individuals would increase. Without subsidies and other incentives, many of the uninsured would forego health insurance coverage, which would more than double government spending per newly insured individual from $3,659 to $7,468.
That's because without the individual mandate, fewer young and healthy individuals would purchase insurance. That means more of the newly insured would tend to be sicker and require more federal subsidies.
Taken together, the Urban Institute and RAND studies provide a good picture of how far-reaching the individual mandate really is. The Supreme Court may flip the switch on the individual mandate (and possibly) the ACA as early as June. All of us will live with the financial burden of that decision for years to come.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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