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CBO Says Repeal of Affordable Care Act Mandate Penalty will Lead to More Uninsured and Higher Premiums

May 24, 2018

The 2010 Affordable Care Act (ACA) imposed a tax penalty on individuals who failed to fulfill the law’s shared responsibility requirement to secure qualifying health coverage. The individual mandate penalty was created to ensure more people secured access to affordable care and preventive services.  

Many studies show that having insurance is the gateway to better health. And having more people and more kinds of people—young and old, healthy as well as sick—among those being covered being has another potential advantage. A larger group with diverse health needs can have a moderating effect on health care premiums.

Last year, the Trump administration led efforts that resulted in elimination of the ACA individual mandate penalty. That policy goes into effect during January 2019.

A newly issued Congressional Budget Office (CBO) report reveals there will be five million more uninsured Americans during 2027, due to the repeal of the penalty. CBO estimates there will be three million fewer individuals enrolled in ACA plans next year than there would have been if the mandate remained in place.

If more people opt out of coverage, they will lose access to basic preventive care and chronic illness management. This leads to sicker people seeking care through more expensive hospital emergency department services.

The report estimates that about 13 percent of the under-65 population, or about 35 million Americans, are projected to lack insurance coverage during 2028. Currently in an average month, 29 million do not have health insurance.

In addition, the CBO report says premiums are projected to increase by 15 percent next year for benchmark insurance marketplace plans. Those premiums are expected to increase about 7 percent per year between 2019 and 2028. This is due in part because younger, healthier individuals will drop coverage when the penalty goes away. Older and sicker people with complex illnesses will dominate the pool of those insured by the marketplace, leading to higher premiums.

HAP shares other provider concerns that an increase in the uninsured and higher marketplace premiums will significantly disrupt progress toward a healthier population. The goal of right care, at the right time, and in the right place is eroded.

Contact Laura Stevens Kent, HAP’s vice president, federal legislative advocacy, for information about federal health care policy.

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