Administration Weakens Health Insurance Mandate

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One of the less popular features of the Patient Protection and Affordable Care Act (“Obamacare”) is the mandate requiring most people to obtain health insurance. Opposition comes especially from people who are too healthy to feel they need much insurance and too well-off financially to qualify for free or subsidized insurance.

However, the mandate is an integral–and many would say indispensable–part of a health insurance system that relies on private insurers. (Many progressives would prefer a single-payer, “Medicare for all” type of system, but health providers and insurance companies did a pretty good job of taking that off the table.) Without a mandate to buy insurance, insurers may not enroll enough people to generate the premiums they need to cover the people with pre-existing conditions, who are now entitled to insurance. In general, that’s how insurance works, of course. If everybody carries auto insurance or homeowners’ insurance, insurers can raise enough money to cover the people who actually have car accidents or damage to their homes. Insurers cannot make a profit if people can wait to buy insurance until they need a payout. A new system that only insures the sick is no more desirable than an old one that primarily insured the healthy.

During the transition to Obamacare, the tax penalties that apply to the uninsured have been gradually phasing in. The hope has been that as the penalties rise and more people sign up, any premium increases should turn out to be modest and temporary. After all, insurers don’t want to scare away too many of their future customers with high initial premiums. But recently, we have been hearing a lot of complaints both from customers who say their premiums are too high, and from insurers who say their revenues are too low because they don’t have enough customers. Some insurers have been dropping out, leaving consumers with fewer choices.

No one can be sure how much these problems would be alleviated as enrollment increases, or how many adjustments to the law might be needed to make it work better.

Executive action

The Trump administration is not waiting to find out. On his first day in office, the President issued an executive order announcing his intention to repeal the law, as he promised during his campaign. What would happen in the short term is not entirely clear. On the one hand, the order says, “In the meantime, pending such repeal, it is imperative for the executive branch to ensure that the law is being efficiently implemented….” On the other hand, it also said, “To the maximum extent permitted by law, the Secretary of Health and Human Services…and the heads of all other executive departments and agencies…shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”  In other words, we’ll enforce the law, but only if it doesn’t cost anyone anything.

This week, the IRS revealed that it will not require taxpayers to report on their tax returns whether they are insured or not. They can leave that section blank, and the IRS will accept their return and impose no penalty for being uninsured. Unless their insurance status comes out in a tax audit, they are in effect released from the Obamacare mandate. This is not entirely new, since during the transition to Obamacare the IRS has been quietly accepting returns from people who failed to provide the requested information. Strict enforcement was supposed to be in effect for returns filed this year. Under the Trump administration, it won’t be in effect at all. Makers of tax preparation software such as TurboTax are now revising their programs to stop flagging users who fail to answer the health insurance questions.

Maybe this will be another executive order to be tested in court. President Obama was accused of exceeding his authority when he set immigration enforcement priorities, in effect exempting from deportation undocumented immigrants who had been brought to the US as children. Now President Trump is acting to undermine an entire law that he dislikes.

Repeal and replace, or quietly kill?

In an ideal world, the country wouldn’t abandon its existing health insurance system until it had a viable replacement. The more one understands about how the various provisions of the Affordable Care Act work together, the more one realizes how challenging it will be to devise something that works better. President Trump has promised that his improved system will cover more people at lower cost, a very tall order.

While we are waiting for Republicans to come up with such a system, the administration is hedging its bets by trying to make the present system unworkable. Then the country may have no choice but to accept the Republican alternative, whether it is really an improvement or not.

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