They may not have succeeded in repealing and replacing Obamacare, but Republicans are close to undoing the law’s least popular feature. The Senate has passed a tax bill to abolish Obamacare’s fines on people who go without health insurance — the so-called individual mandate. House Republicans are very likely to agree on that provision.
In the past, I’ve called for the fines to be abolished — but only as part of a broader legislative change to Obamacare. Just two months ago, I argued that President Donald Trump should keep enforcing the fines. My main objection concerned the separation of powers: The president has to wait for Congress to pass a bill to lift the fines. I also suggested, though, that lifting the fines without a broader adjustment of Obamacare would be irresponsible.
I’ve changed my mind about that point. Repealing the mandate, even as a stand-alone measure, now seems to me to pose fewer dangers than it once did.
Throughout the debate over Obamacare, the Congressional Budget Office has attributed great power to the mandate. But the CBO has been backing away from its view about how crucial the mandate is. In its November report on the subject, it now concludes that the market for individual health insurance “would continue to be stable in almost all areas of the country throughout the coming decade” without the mandate. It does not, in other words, foresee a “death spiral” in which healthy people take the opportunity to flee that market, premiums skyrocket as they leave, and other healthy people then exit the market, too.
The CBO does, however, project that 13 million fewer people will have insurance. They would not be “losing” their coverage, as politicians and journalists often put it: They would be declining to sign up for it. Some of them, it’s true, would be declining to sign up for it because they would be facing higher premiums. The CBO projects that individual-market premiums would rise about 10 percent as healthy people declined that coverage.
But the people driven out by higher premiums would be a small minority of the 13 million. Only 5 million of the 13 million would be leaving the individual market. (The rest of them would be declining Medicaid or employer coverage.) Even in this subset of the market, most departures would be purely voluntary. Obamacare protects the vast majority of people who buy individual policies through the exchanges from premium increases.
Lawrence Summers, who was a top economics adviser to President Barack Obama, argues that thousands of people will die because they decline insurance coverage. But that estimate is open to dispute, and anyway our usual practice is, as it should be, to allow people to take risks with their own health and lives.
Assuming the CBO is right about the 10 percent premium increase, on the other hand, it’s the best argument against lifting the fines. There are, however, three points that weaken this argument.
The first is that the CBO is in the process of re-evaluating the effects of the individual mandate. At the same time it released its estimate of coverage reductions and premium increases, it said that “the preliminary results of analysis using revised methods indicates that the estimated effects on the budget and health insurance coverage would probably be smaller than the numbers reported in this document.” Even before this re-evaluation, the CBO had been lowering its estimate of the effect of the mandate on premiums: In 2016, it had said that ending it would raise them by 20 percent. It seems likely that its next estimate will go lower than 10 percent.
Second, we should not be prisoners of a status quo bias. If we did not have the mandate, would it be a good idea to start fining 6.5 million people in order to bring down premiums by less than 10 percent? If you don’t think so, as I don’t, is the situation we face really so different?
Third, Congress can take up future legislation to mitigate the premium increase. Ending the fines while keeping the rest of Obamacare in place will mean that healthy people can refrain from getting insurance and then, if they develop an expensive medical condition, buy coverage at the same rates as everyone else. Republicans have offered legislation that would let states try methods other than the mandate to prevent such gaming of the system. States could, for example, allow insurers to charge a bit more for people with long breaks in their coverage, and thus to give healthy people an incentive to maintain that coverage.
Republicans have famously failed to pass health care legislation this year. But future attempts at reforming Obamacare will have an advantage over previous ones. The most politically powerful argument against Republican health care legislation has been that it would “take insurance away” from many millions of people. That argument was based on the CBO’s findings, and most of it was based on the end of the individual mandate.
If Republicans end the mandate in the tax bill, any estimates of the effects of future legislation on coverage will be about 13 million lower. The tax bill doesn’t just advance a major conservative objective on health policy. It prepares the ground for replacing other parts of Obamacare as well.
Ramesh Ponnuru is a Bloomberg View columnist. He is a senior editor at National Review, visiting fellow at the American Enterprise Institute and contributor to CBS News. Follow him on Twitter: @RameshPonnuru