2017-11-19 17:15:02
Will Cutting the Health Mandate Pay for Tax Cuts? Not Necessarily

Alexia Manon Senior is 27 and healthy — the type of person who might be most tempted to forgo health insurance if Republicans enact a tax bill that repeals the Affordable Care Act’s requirement that most Americans have coverage or pay a penalty.

But Ms. Manon Senior, a graduate student in Miami, said she would hold tight to her coverage, at least as long as she keeps getting nearly $5,000 a year in government subsidies to pay for most of it.

“The reason why I’m currently in the A.C.A. is not because I want to avoid the tax penalty,” she said. “It’s because of the ‘What if?’ If something happens and I leave the hospital with a $10,000 bill, it’s a lot of money that I don’t have.”

People like Ms. Manon Senior complicate the argument of Senate Republicans who are counting on repeal of the so-called individual mandate to free up hundreds of billions of dollars to pay for an array of tax cuts to corporations and individuals. They are assuming that without a mandate, many people would no longer buy insurance, so the government would spend billions of dollars less on the subsidies the health law provides to help those under a certain income level pay their premiums.

The nonpartisan Congressional Budget Office has estimated that doing away with the mandate would result in nearly 13 million more people without insurance and federal savings of $338 billion by 2027. But polling data, analysis from a private forecasting agency and interviews with people who buy coverage through the Affordable Care Act marketplaces suggest the savings could be far less, largely because many people who qualify for the subsidies will still want to take advantage of them.

Even the budget office is revising its estimates and has predicted the new numbers would be smaller.

In a survey this fall, the nonpartisan Kaiser Family Foundation found that just 7 percent of people who buy insurance on the individual market said they would go without coverage if the mandate were no longer enforced. A majority said the mandate was not a reason they bought insurance. Only about one in five said it was a major reason.

“It’s consistent with other work we’ve done showing people want and value health insurance,” said Liz Hamel, Kaiser’s director of public opinion and survey research. “Especially in the marketplace, where so many are getting government help to pay for that coverage, I think that’s a bigger motivating factor for them to get it than the mandate.”

The mandate, in other words, may not be much of a stick, but the subsidies are a tempting carrot.

A new analysis from S&P Global Ratings projected the 10-year savings at $60 billion to $80 billion, saying that the number of uninsured would drop by only five million at most by 2027. Most people buying insurance are doing so not because they fear the mandate, the agency said, but because they get a subsidy that “meaningfully offsets” the cost.

Nearly 60 percent of people who buy their own insurance receive subsidies, S&P Global estimated, including 84 percent of people who use the Affordable Care Act marketplaces.

Repealing the mandate was not a part of the tax legislation that passed in the House last week, but Senate leaders added it to their bill, both as a step toward making good on their promise to dismantle Obamacare and as a way to generate a big pot of revenue. If the Senate passes its bill, differences between the two would be worked out in conference committee.

On Sunday, Mick Mulvaney, President Trump’s budget director, said on CNN’s “State of the Union” that the administration supports repealing the mandate. Most people who owe the penalty earn less than $100,000 a year, he said, arguing that “there’s actually a benefit to folks” if the mandate goes away. But he added, “If it becomes an impediment to getting the best tax bill we can, then we’re O.K. with taking it out.”

Georgia DiBenedetto, 56, who manages a financial planning office remotely from her home in Eugene, Ore., said that it was initially the threat of a penalty that made her buy health insurance. But she came to appreciate the need for coverage when she ended up in the hospital with swelling on her brain earlier this year.

She calls the subsidies she received to buy insurance “a lifesaver” — she earns about $40,000 a year and received about $250 a month in subsidies last year, she said. And she’ll keep her coverage with or without a mandate.

“If I had been thinking, ‘How am I going to pay a hospital bill?’ I know me, I wouldn’t have gone to the hospital,” she said. “I don’t know what would have happened.”

Anneliese Kittrell, 30, manages a veterinary practice in Detroit, earning between $30,000 and $40,000 a year, which she said qualifies her for a minimal subsidy — “it’s nothing that helps, that’s for sure,” she said. Yet she was among those who told the Kaiser poll that she would continue to buy insurance, regardless of the mandate.

“I don’t get sick, which is the funny part,” she said. She identifies with the so-called young invincibles who don’t buy health insurance because they think they won’t need it. Still, “it’s not how I want to live my life, going through problem after problem,” she said. “I’d rather have my insurance in place if I need it.”

The penalty for not carrying insurance is $695 per adult and $347.50 per child, up to a maximum of $2,085 or 2.5 percent of household adjusted gross income, whichever is higher. (If the mandate goes away, the government would not get the penalty revenues either.) There are a number of ways to qualify for an exemption, including if the cost of coverage would eat up too much of someone’s annual income; far more sought exemptions in 2015 than owed the fine.

Authors of the Affordable Care Act considered the mandate to be essential to its success, because it is supposed to prod younger and healthier people to buy insurance. With them in the risk pool, the cost of health insurance becomes lower for everyone.

Repealing the mandate would push premiums up 10 percent each year over what is currently projected, the Congressional Budget Office estimates. That could further destabilize the law’s already fragile marketplaces if it compels healthy, unsubsidized customers to leave. Higher premiums would also push the subsidies higher, increasing the government’s financial obligation to those who qualify for them.

The mandate continues to be unpopular, in the abstract. In a Kaiser poll released last week, 55 percent of respondents supported getting rid of it.

But about one-third of those people changed their minds when they were told that repealing the mandate would increase premiums and might result in 13 million more people without health insurance — and that most Americans automatically satisfy the requirement to carry health insurance because their employers provide it.

Over all, about 60 percent of those polled opposed eliminating the requirement once they were told those points.

In 2015, the last year for which data is available, about 6.5 million taxpayers reported penalty payments for not having health insurance, totaling about $3 billion, down from 8.1 million tax filers who paid a total of $1.7 billion in 2014, the first year the mandate was in effect. (The 2014 amount was lower despite the larger number of people penalized because the penalty itself was lower that year.) Jason Levitis, who was the Affordable Care Act lead at the Treasury Department during the Obama administration, said the number had dropped as “more people understood how the mandate and the exemptions and the subsidies worked.”

Christy Reppeto, who is 53 and lives outside Dallas, understands all that by now — and has decided the law doesn’t work for her. She and her husband, who own an online travel company, earn too much to qualify for a subsidy. They canceled their coverage this year and resorted to a much cheaper short-term plan that does not meet the coverage requirements of the Affordable Care Act, subjecting themselves to the tax penalty.

“The middle class, like us, are getting slammed,” said Ms. Reppeto, who said she had been paying more than $2,000 a month for a plan that covered her family of four.

But the exit of the Reppetos and other healthy people at their income level does not save the government any money because they did not qualify for federal subsidies.

Tracy Pate, who works for a nonprofit group in northeastern Tennessee that helps people sign up for insurance, said the power of the subsidies has helped many people she deals with come to appreciate the law.

Many in the poor, largely rural and conservative region hated the Affordable Care Act at first, she said. But now, for many, “it’s too beneficial.” She has been busier than expected since open enrollment began on Nov. 1, surpassing her group’s weekly goals.

Ms. Pate recently met with a man who was “all in a tizzy,” she said, because he had heard premiums were rising sharply for next year. But she informed him that in fact, his subsidy would grow and his personal costs would drop, a common occurrence in some parts of the country this year.

“He said, ‘I don’t agree with Obama and I like Trump, but you know what? I do have to say this has helped me,’” Ms. Pate said. “I think that people are appreciative of it. Even though they don’t like to admit it, they see the benefits of it now.”