The House and Senate this week voted in favor of a $1.5 trillion tax proposal that included a provision zeroing out the individual mandate penalty. Starting in 2019, people will no longer be required to pay the $695 penalty for choosing to forgo health insurance coverage.
The anticipated effects of losing the penalty, however weak critics say it is, are clear: Enrollment in the individual market will go down, health plan premiums will go up, and the market will remain unstable for the foreseeable future. Health plans—especially fond of planning and averse to unpredictability—may choose to stop selling individual plans altogether, reducing consumer choice.
The elimination of the penalty, coupled with other federal actions, such as Trump's executive order to expand access to short-term and association health plans, are likely to make 2019 a challenging year for the individual market, possibly nudging it toward collapse.
"Those policies mean uncertainty. Health plans are not about gambling in Las Vegas. Health plans are about being in a business where they can predictably price for the future," said Peter Lee, executive director of Covered California. "Now's the time for bipartisan action at the federal level to make sure the individual markets do not collapse in 2019."
Health insurers, providers and state insurance departments have been calling for legislative fixes to help stabilize the marketplace and lower premiums for consumers who aren't eligible for federal financial help. Experts say those calls will only intensify as health insurers near the deadline to submit initial rate requests for 2019, due in the spring.
"The repeal of the individual mandate is a setback to achieving increased access to high-quality, affordable healthcare," Kaiser Permanente CEO Bernard Tyson wrote Wednesday on Twitter. "We encourage policymakers to support pending bipartisan recommendations, which is needed to provide the healthcare and coverage for a healthy America."
In particular, two Obamacare stabilization bills aimed at funding the cost-sharing reduction subsidies for the next two years, and funding a reinsurance program for high-cost patients enrolled in the individual market, have been held up as potential ways to stabilize the individual market, where about 22 million people get coverage.
A bill authored by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) would guarantee funding for CSRs in 2018 and 2019. The Trump administration in October decided to end those subsidies, which lower deductibles and copayments for exchange customers with incomes up to 250% of federal poverty level.
Another bill from Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) would provide $10.5 billion in reinsurance funding through 2020 to help lower insurance premiums by compensating insurers for their costliest plan members. Collins initially said she would vote for the tax bill only if Congress also passed the two Obamacare stabilization proposals. However, the measures were left out of the end-of-the-year spending bill. Collins issued a statement maintaining her confidence that the measures would be passed, though after the start of the new year.
Some observers now doubt that the Alexander-Murray bill to fund CSRs will do much to soften the blow of losing the individual mandate.
"The focus on Alexander-Murray has been odd, since it really would do almost nothing to stabilize the market or mitigate the effects of repealing the individual mandate penalty," Larry Levitt, senior vice president at the Kaiser Family Foundation, said in an email. But a federal reinsurance fund would blunt the premiums increases that result from the loss of the mandate, he noted.
Health insurers in most states increased individual premiums for 2018 to make up for the loss of CSR funding. Many states loaded the premium increases onto silver plans, which are used to determine premium tax credits. Because financial assistance increases as the silver plan premiums go up, many exchange enrollees will end up better off in 2018 than if the Trump administration had committed to paying the CSRs. Funding CSRs now would likely lead those consumers to pay more.
"Legislation funding CSRs would probably be a negative thing at this point," said Matthew Fiedler, an economist at the Brookings Institution's Center for Health Policy.
Funding for a federal reinsurance program could do more to lower premiums and keep insurers selling plans on the exchanges. A study from the Council for Affordable Health Coverage, whose members include healthcare companies Aetna, Cigna, CVS Health and Express Scripts, found that the Collins-Nelson reinsurance proposal would reduce average individual premiums by 9% to 12% in 2019 and 2020.
That would offset the 10% premium increase the Congressional Budget Office expects to result from the loss of the individual mandate. The CBO also estimates that 4 million people would drop their health insurance plans in 2019, rising to 13 million by 2027. But experts doubt the reinsurance proposal's chances of passing in a Republican-controlled Congress.
"The federal-level actions that would meaningfully improve the individual market are probably not in the cards for 2018," Fiedler said.
States may be better able to keep their individual markets afloat by taking matters into their own hands. States could implement their own individual mandate penalties. Massachusetts has had one for the past 10 years. However, implementing the ACA's most unpopular provision would be politically tricky. Officials in states including California, Connecticut, Maryland and others are considering their own mandates.
States could also set up state-based reinsurance programs and apply for federal funding under a 1332 waiver. Alaska, Minnesota and Oregon have lowered premiums in their marketplaces by taking that route. Most states don't have enough money to run a reinsurance program independently.
Chris Sloan, senior manager at consultancy Avalere Health, insisted, however, that federal action to stabilize the marketplace would have a much greater impact than state-based actions alone. "Doing something at the federal level has an impact on all states and puts more money in the market, which helps stabilize it," he said.
An Avalere analysis this month found that funding the CSRs and a $5 billion reinsurance program could lower 2019 premiums by 18% and increase enrollment by 1.3 million. The study did not assume the mandate would be repealed.
Beyond lower enrollment and higher premiums, states next year will also have to grapple with the potential influx of short-term health plans and association plans. Those plans, which were once held in check by the individual mandate, could flourish in its absence, especially under an administration that has encouraged increased access to them. Insurance experts argue that short-term plans, which are skimpier and don't have to offer essential health benefits, could steal necessary healthy enrollees from the marketplace.
Covered California's Lee said states will first have to wait and see what the federal government does before reacting. "Is the federal government going to say, let states be on their own and act and react? Or is the federal government going to be part of solutions that actually have a true focus on creating workable markets?"
Shelby Livingston is an insurance reporter. Before joining Project Japan in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.