The Urban Institute released a handy explainer this week, detailing why proposals to delay the individual mandate are a bad idea. Proponents of such a delay argue that if the Obama Administration delayed the employer mandate, they should also delay the individual mandate. However, unlike the employer mandate, the individual mandate is like a leg on a three-legged stool. If you knock it out, the foundation of the Affordable Care Act collapses.
The Urban Institute points to three primary reasons:
- Eliminating or delaying the individual mandate dramatically increases the number of uninsured, because some individuals, particularly healthy individuals, will choose not to participate.
- Having fewer, sicker people enroll in insurance means that the per-person cost of coverage will be considerably higher. In fact, the Urban Institute estimates that, without the individual mandate, the average subsidy amount for individuals receiving a subsidy is up to 24% higher than with the mandate.
- Low enrollment in the exchanges in 2014 due to lack of an individual mandate could lead to an adverse selection cycle that will make it difficult to sustain a viable risk pool over the long term. In insurance parlance, this is called an adverse selection “death spiral.”
By comparison, delaying the employer mandate has a negligible effect on coverage levels, costs, and the overall risk pool of the exchange.
The Urban Institute also provides a very important reminder of how incredibly disruptive congressional action to delay the mandate would be. Thirty-two states have devoted thousands of hours of staff time – and more than $2.6 billion in taxpayer dollars – to build the necessary structures for the open enrollment period set to begin just one week from today. And no less significantly, private health insurance companies have had to invest staff time and resources to participate in new federal and state systems, and create new internal systems of their own.
These insurers have also developed premium bids for the exchanges that assumethat the individual mandate begins on January 1, 2014. To date, those premium bids have come in generally lower than those predicted by CBO. But if the individual mandate is delayed, 2014 premiums will not reflect the likelihood of a sicker risk pool – and the higher claims costs for insurers. Because it’s too late in the year for insurers to recalculate and re-file their premium rates for review, they could be exposed to significant losses and it could even threaten their solvency.
The bottom line? An attempt to delay the individual mandate is tantamount to an attempt to repeal the ACA itself.