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Insurers Facing Impossible Scenario: Cover Everyone, But No Individual Mandate

By Gregory A. Freeman  
   December 13, 2017

Healthcare plans are already raising premiums and deductibles through the roof, but they will have to raise them even higher if the individual mandate is removed and healthier consumers leave the plans. Those rising prices could drive even more consumers to forego coverage, since they could do so without fear of a penalty.

The only consumers who stick with the exorbitantly expensive health plans will be the ones whose healthcare expenses would be even higher. That's a progression that cannot end well for insurers, health plan leaders and analysts say.

Removing the individual mandate would upset the balance built into the ACA for health plans, leaving them with the obligation to cover sicker consumers at an artificially low cost without requiring the sign-up of the healthier people that keep the companies profitable.

The individual mandate is the one brake stopping the healthcare system from rolling back to the pre-ACA days, says CEO John Baackes of L.A. Care Health Plan, which covers more than 2 million Medi-Cal members.

"There is no question that the penalties associated with the ACA's individual mandate motivated people to enter the marketplace. Enrollment here at L.A. Care more than doubled when the minimum penalty rose to $695 last year. Without a penalty, the motivation to buy in is gone, and younger, healthier people are more likely to drop out," he says. "Those who stay in the market will have to pay more. But really, everyone is going to pay more. There's no way around it."

The repeal of the individual mandate is included in the tax bills being finalized on Capitol Hill. The Congressional Budget Office has estimated that premiums on the marketplaces will increase by at least 10% in 2019 if the individual mandate is repealed, notes Brady Bizarro, an attorney with The Phia Group, a consulting company that focuses on healthcare cost containment.

"Without the mandate, insurance companies may find it exceedingly difficult to make a profit and are likely to leave the marketplace, especially the individual exchanges that tend to insure the sickest people," Bizarro says.  

No one knows for sure how many young, healthy individuals will drop their health insurance coverage if the mandate is repealed, Bizarro says. For employer-sponsored plans, especially self-funded plans that tend to be less expensive than their fully-insured counterparts, it may be that healthy workers keep their coverage as part of their overall benefit packages.

Gregory A. Freeman is a contributing writer for HealthLeaders.

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