Elimination of ACA Mandate Penalty Could Reduce Coverage, Increase Premiums

A new study estimates that eliminating the individual mandate penalty in the Affordable Care Act (ACA) may reduce insurance coverage enrollment and boost premiums, according to a survey of enrollees in the 2017 individual market in California.

The survey was conducted by investigators at the Mongan Institute Health Policy Center and the results were published in a Health Affairs report.

The individual mandate provision has been a controversial component of the ACA; however, the tax penalty for noncompliance was eliminated starting in 2019. According to the study, the researchers aimed to evaluate the potential impact of the change on enrollees’ decisions to purchase insurance and on individual market premiums.

The study included more than 3000 individuals enrolled in both California’s state-based insurance marketplace and those who purchased plans directly from insurance companies and completed the surveys online, over the phone, or on paper. Participants were asked whether they were aware of the penalty for not purchasing insurance and whether they would have purchased coverage if there were no penalty. Survey questions also covered current health status, chronic health condition status, type of insurance, and other personal, health-related, and sociodemographic factors.

Overall, the findings showed that 19% of participants would not have purchased health insurance in 2017 without the penalty, whereas 72% would have. Nine percent were either unaware of the penalty or did not answer the question.

Additionally, younger participants were more likely to respond that they would not have purchased insurance. Those without chronic health conditions were significantly more likely to say they would not have purchased insurance than were those with 2 or more conditions, although the researchers noted that self-reported health status did not appear to affect answers. Hispanic enrollees, those with lower income and education levels, and those who had been uninsured in the prior year were also more likely to say they would not purchase insurance.

The researchers also estimated how much premium prices would increase if the penalty elimination led to that drop in insurance coverage. In California, monthly premium prices would increase by 4% to 7%, and the effect could be greater in other states, the study authors noted.

According to preliminary data from HealthCare.gov, estimates show that approximately 4% fewer individuals enrolled for coverage in 2018 than 2019.

“Although coverage losses in 2019 could be more modest than estimated in our study, it will be important to assess who did not enroll this year, especially given other policy changes such as a shortened open enrollment period, fewer services to assist with enrollment, and expanded availability of cheaper, but less comprehensive insurance plans,” corresponding author Vicki Fung, PhD, of the Mongan Institute, said in a press release. “The combination of these policy changes could exacerbate the potentially larger losses in enrollment we found among historically disadvantaged groups.”

References

Fung V, Liang CY, Shi J, et al. Potential effects of eliminating the individual mandate penalty in California. Health Affairs. 2019. https://doi.org/10.1377/hlthaff.2018.05161.

Dropping the individual mandate penalty could reduce insurance coverage enrollment, increase premiums [news release]. Massachusetts General Hospital’s website. https://www.massgeneral.org/about/pressrelease.aspx?id=2334. Accessed January 8, 2019.