The Agenda

The Death of the Individual Mandate

Just filed a column on the latest Obamacare developments. The short version is that Obamacare is designed to expand coverage through a combination of carrots and sticks, and the sticks have been falling by the wayside. As Amy Goldstein of the Washington Post reports, the Obama administration has announced that people who’ve had their insurance policies (a) can purchase catastrophic plans on the insurance exchanges regardless of age and (b) they’ve been granted a “hardship exemption” from the individual mandate. (Here’s a quick primer on the individual mandate, which is quite a stick indeed for those subject to it.) The political challenge for the president and his allies is obvious. Douglas Holtz-Eakin of the American Action Forum explains it well:

Substantively, it opens the door to deferring the mandate entirely and by acknowledging that catastrophic plans would be suitable coverage it makes a lie of all the rhetoric about how existing insurance (“underinsurance”) is “subpar” and “poor”. It will be fine for 2014.  And it represents another round of changing the rules of the game for citizens and insurers.  It is ridiculously unfair to the latter, who the president just asked to cover bills even if they had not been paid, or even if it was not clear the person had a policy.  It is an invitation to those who have chosen policies through to cancel them and waive the mandate. Moreover, there will be a black market for fraudulent cancellation letters.

Donald Taylor Jr. considers the implications of allowing over-30 consumers to purchase catastrophic plans that were priced for under-30 consumers.

Ezra Klein of Wonkblog makes a related series of observations:

Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it’s wrong. But it’s hard to argue that it’s right for the currently uninsured but wrong for people whose plans were canceled.

Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people who plans were canceled more deserving of help than people who couldn’t afford a plan in the first place?

The same goes for the cheap catastrophic plans sold to customers under age 30 in the exchanges. A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. Why don’t people who couldn’t afford a plan in the first place deserve the same kind of help as people whose plans were canceled?

And Avik Roy of Forbes argues that the Obama administration has implicitly acknowledged that the Affordable Care Act has resulted in unaffordable care for large numbers of people:

For years, these pages have raised the concern that the “Affordable Care Act” will drive up the cost of health insurance. “What is remarkable about the Patient Protection and Affordable Care Act,” I wrote in 2010, is “its devastating consequences for the cost of health insurance.” A 49-state analysis I conducted along with two colleagues at the Manhattan Institute found that the average state will see underlying premiums increase by an average of 41 percent in the individual market, the market where people shop for coverage on their own, instead of getting it through an employer or the government. (Our state-by-state interactive map can be found here.)

But this most recent announcement from the Obama administration is the first time it has publicly admitted that Obamacare is making health insurance less affordable, not more so, for millions of Americans.

Keep in mind that the officials charged with encouraging people to enroll have been reluctant to invoke the individual mandate, as Anemona Hartocollis reported in November:

[O]fficials at Enroll America, a nonprofit agency that is promoting the new marketplace, said they were deliberately playing down the penalty in favor of themes that tested well with focus groups: financial assistance, core benefits, no one being turned away for pre-existing conditions, and easy comparison shopping. “That doesn’t mean that the penalty or the mandate isn’t an important piece of the law from a policy perspective,” said Sophie Stern, a senior policy analyst for the agency. “But from a messaging perspective, this is what we find resonates best.”

And Enroll America seems to be typical in this respect. So what will happen when people come to understand the mandate, and how unevenly it is to be enforced? Survey data tells us that roughly twice as many uninsured Americans think the law is a bad idea as think it is a good idea, and 55 percent of Americans claim that they prefer the pre-Obamacare health system according to the Reason-Rupe poll. This is quite a feat when you consider that the pre-Obamacare health system was no great shakes.

As Yuval Levin writes at The Corner, the Obama administration is pounding on the panic button. He goes so far as to suggest that the individual mandate is done for:

I would now assume that no one will pay the individual mandate fine for 2014. The administration may give up on the mandate in the course of the ongoing enrollment period if the political pressure is great enough, or they may keep up the pretense of it through the end of the enrollment period in March (when it will have finished its work, so to speak, since its purpose is to influence choices made during that period) but then exempt everyone from it as they did with the employer mandate for this year. Having now exempted from the fine people whose policies were cancelled and who haven’t spent the money to get more expensive and less appealing new coverage, the politics of still applying the fine to everyone else who is uninsured this year will probably just not be sustainable, and the politics of exempting people from it (especially if they can hold out on doing so until after March 31) will be far too appealing for this White House to resist. They may claim the mandate will be back in 2015, but if they do exempt everyone from it in 2014 it will be hard to bring it back. 

The administration claimed in court in 2012 that the mandate was absolutely essential to Obamacare’s implementation, and maybe it was. But they have come to realize over the past few months that Obamacare as they envisioned it is not really going to happen, and their goal now is to enable the survival of whatever elements of it can survive, so that they can regroup when the dust settles and try to rebuild some form of the liberal approach to health financing. The mandate is becoming an impediment to that goal, and it strikes me as reasonably likely now that it will not survive. [Emphasis added]

One is reminded of Eric Patashnik and Julian Zelizer’s recent reminder that Obamacare is far from entrenched.


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