CBO: Axing ACA mandate would give GOP $338 billion more for tax cuts

(Updated at 5:12 p.m. ET)

If Republicans repeal the Affordable Care Act's individual mandate as part of their tax cut bill, that would give them $338 billion in cost savings over 10 years to soften the bill's rollback of popular tax breaks like the mortgage interest deduction, according to a report released Wednesday.

There would be 13 million fewer people with health insurance in 2027 due to repealing the mandate, and average premiums in the individual market would increase 10% more annually than if the mandate were preserved.

Those effects would occur, the CBO said, because healthier people would be less likely to buy insurance without the law's tax penalty for not being covered, and because the premium increases arising from the sicker enrolled population would lead fewer people to buy.

The federal government would save an estimated $185 billion on premium subsidies for people in the insurance exchanges, and $179 billion on Medicaid expansion funding if the mandate is repealed, the agency said.

House Republican leaders had asked the CBO to estimate how much the government would save by repealing the law's tax penalty for those who fail to buy coverage because they are considering including that measure in their Tax Cuts and Jobs Act, which they unveiled last week.

President Donald Trump has urged them to include it because it would kill two birds with one stone—abolishing a cornerstone of Obamacare and giving Republicans more leeway in cutting taxes without exceeding their self-imposed cap of increasing the federal deficit by $1.5 trillion over 10 years.

But some key Republicans, including House Ways and Means Committee Chairman Kevin Brady (R-Texas), warn that including the mandate repeal could sink the tax bill, particularly among Senate Republicans worried about market disruption and coverage losses.

Last December, the CBO that erasing the unpopular tax penalty linked to the individual mandate would reduce federal spending on premium tax credits and Medicaid expansion payments by $416 billion over 10 years because fewer people would seek coverage. The agency estimated that 15 millionfewer people would have insurance in 2026 if the tax penalty were eliminated.

Insurers and many health policy experts say the mandate penalty is important in getting younger and healthier people to buy insurance, and their presence in the market helps offsets the cost of older and sicker enrollees, keeping premiums in check.

They warn that eliminating the mandate without replacing it with some other strong mechanism to give people an incentive to maintain continuous coverage could quickly unravel the already shaky individual insurance market.

"Repealing the individual mandate could be the final straw causing the individual insurance market to collapse as many insurers exit," tweeted Larry Levitt, senior vice president at the Kaiser Family Foundation.

James Capretta, a conservative health policy analyst at the American Enterprise Institute, recently that Republicans should embrace alternative continuous coverage mechanisms such as a late-enrollment penalty and automatic enrollment of people who would otherwise go uninsured.

He warned that without any alternative mechanism, the individual market will become even more unstable than it currently is. But he lamented that Republicans "haven't yet come to grips with this reality … If they want to repeal the individual mandate, then they have to get serious about replacing it with a provision that will work just as well or better."

If House Republicans don't include the mandate repeal in their tax bill, the Trump administration an executive order to gut enforcement of the mandate. It may be able to do that by broadening the definition of categories of people who are exempted from the tax penalty due to financial hardship.

Insurers and providers are worried. "We want to make sure there is either a carrot or a stick that is efficient enough to get people to enroll," said Margaret Murray, CEO of the Association for Community Affiliated Plans, which represents safety net insurers. "We would be open to other suggestions, but when we looked at it, the mandate seems the most effective way."

Harris Meyer

Harris Meyer is a senior reporter providing news and analysis on a broad range of healthcare topics. He served as managing editor of Project Japan from 2013 to 2015. His more than three decades of journalism experience includes freelance reporting for Health Affairs, Kaiser Health News and other publications; law editor at the Daily Business Review in Miami; staff writer at the New Times alternative weekly in Fort Lauderdale, Fla.; senior writer at Hospitals & Health Networks; national correspondent at American Medical News; and health unit researcher at WMAQ-TV News in Chicago. A graduate of Northwestern University, Meyer won the 2000 Gerald Loeb Award for Distinguished Business and Financial Journalism.

  Follow on Twitter



Loading Comments Loading comments...