Congress repealed the Obamacare individual mandate; now states are drafting contingency plans

States will need to get creative.

CREDIT: C-SPAN

With its passage of the Republican tax bill Wednesday, Congress has successfully repealed a critical component of the Affordable Care Act (ACA) — but states could still safeguard current health law.

To offset a tax cut — which largely benefits wealthy individuals over the long term — Republican lawmakers repealed the individual mandate. The tax overhaul bill now goes to the president’s desk. Once the bill is signed into law, the mandate will be repealed in 2019.

The individual mandate requires every U.S. citizen to have health insurance or pay a tax penalty. The tax penalty is 2.5 percent of a household income or $695 a year per person — whichever is higher. A majority of people support eliminating the mandate until they learn about the potential impacts, a recent Kaiser Family Foundation poll found. The Congressional Budget Office (CBO) says marketplace premiums will increase by 10 percent most years and 13 million more people will be without insurance by 2027. Given the dire forecast, there’s appetite to mitigate the damage.

Senator Susan Collins’ (R-ME) yes-vote was contingent on two ACA stabilization bills that have not passed. Experts have repeatedly said her bills — which pay insurers for providing federal subsidies and create a federal-level reinsurance program, or insurance for insurers — would mostly neutralize premiums but would not address the uptick in uninsured:

To reduce the number of newly uninsured, state officials could step in. Nicholas Bagley, a law professor at the University of Michigan, suggested states “save the individual mandate” by implementing their own. ACA blogger Andrew Sprung suggested using the revenue generated from a state-level mandate to partially fund a state-level reinsurance program, to further offset market damage done by the federal tax bill and Trump administration more broadly.

Officials in several Democrat-led states are seriously thinking about implementing a mandate by way of a tax. One state senator told Politico a state-level mandate is on the table and is “fairly confident there will be a bill if the tax plan results in a repeal of the individual mandate.” And California’s exchange director raised a state-level mandate during a board meeting earlier this month, according to Vox. 

Massachusetts is the only state to have a mandate. It was never taken off the books when officials first implemented it during its statewide 2006 health care overhaul under then-Gov. Mitt Romney (R).

Dreaming up a mandate back-up plan is a tall order. States have local politics and laws to consider. Additionally, seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — have no local income tax and, as a result, are unable to implement a mandate by way of a tax. Those states will need to get creative if they want to mitigate the effects of a repealed mandate.

No income tax for a state-level mandate

“We’re not shy about any kind of hook,” Washington Insurance Commissioner Mike Kreidler told ThinkProgress. “We are looking at everything.” Kreidler listed civil penalties as potential federal-mandate replacements. Like getting a drivers or hunting license could be contingent on having insurance, he said. “We have to take a look at how effective they’ll be [at] motivating the right people.” Specifically, could this incentivize people who don’t purchase insurance until they need it — until they’re sick?

“I think the devil would be in the details,” said Michael Marchand, chief marketing officer with the Washington exchange, when asked about a standard issue fee in the absence of a federal-mandate. Who would be in charge of collecting the money and where would that money go, he asked. “I think that’s what we are thinking through … we are having those conversations right now at the elementary level,” Marchand said. 

Could “automatic enrollment” work — in which people automatically are enrolled in a plan and can opt-out? Perhaps a “lockout,” in which people would be locked out of coverage for an extended amount of time if they fail to sign up? ThinkProgress asked Marchand if these were viable possibilities and he said Washington is studying every option very carefully. “You don’t want it to be an additional deterrent — the idea is to have people insured because it is important to them — physically, emotionally, and financially.”

If Washington wants to fill the mandate void, it’ll likely need to go through the state legislature. And Washington officials are already trying to push a state-level reinsurance program to stabilize the marketplace. Kreidler said the insurance commission office is trying to get reinsurance legislation passed and then approved by the Trump administration before the sixth wave of open enrollment. (Washington’s fifth wave is currently underway and ends January 15th.) 

Washington officials have invested in its state exchange, Washington Healthplanfinder, and embraced the ACA more broadly. They set up their own exchange, expanded Medicaid, and invested state money and manpower into advertising open enrollment when the current administration opted not to. For all that devoted effort, it looks like officials will continue to try to make it work.

Alaska has tried to make current health law work for residents. While it didn’t set up its own exchange, officials successfully created a state-level reinsurance program because insurers were losing money and offloading costs to enrollees by way of premium hikes. Still, with just one insurer, the state does not have a strong federally-run marketplace and still has among the highest-cost premiums nationwide.

“Our market has decreased over the last two years from a high of 20,000 to about 16,000,” Lori Wing-Heier, Alaska’s Insurance Division Director, told ThinkProgress in an email. “Again, we support the mandate but with such a small market, knowing how many are already not complying, it is hard to show an impact that will further decrease the market.”

Alaska officials do not expect the mandate to have a significant impact, and, as such, it’s not likely that they will implement a contingency plan. ThinkProgress asked Wing-Heier if officials are considering back-up plans, but she did not respond.

While Alaska’s decision does not directly affect Washington, Kreidler worries about the potential ripple effect that could result if the market in another state collapses. Insurance companies now operate in a marketplace where they need to provide federally qualified health plans, but no one’s obligated to purchase it. Insurance companies can choose to exit because of this uncertain outlook. For all its concerted efforts, Washington is not immune to insurance companies pulling out of the exchange, thus leaving consumers with zero options. This nearly happened over the summer in two Washington counties because insurers were uneasy due to policy decisions coming out of Washington, D.C.  

“It’s like someone shouting fire in the theater, start stampeding to the door — and that’s not a pretty sight,” Kreidler said. 

With Republicans in control of Congress and the White House, states will need to protect the ACA, whose drafters envisioned it to be a market for anyone without an employer-based or a government health plan. Creating a state-level mandate or alternatives to it will be challenging when the federal government is clearly not invested in enacting the drafters’ vision and has yet to articulate one of its own. When the marketplace was first implemented, states had the opportunity to personalize their exchanges. Few took the chance to — for political and systemic reasons — despite federal support then. Creating an alternative to the federal individual mandate could produce similar results.