A team of Harvard researchers say that California’s individual market is likely to remain reasonably stable and not suffer an immediate downward spiral as a result of eliminating the individual mandate in 2019, despite the potential for an 18 percent drop in enrollment. The Tax Cuts and Jobs Act, which passed in December, eliminates the Affordable Care Act (ACA) penalty on those who don’t enroll in a qualifying health insurance plan. Eliminating the mandate penalty could matter less in California because it has one of the most stable individual markets in the nation with a more favorable risk mix than in other states
However, the effects could be more severe based on how other policy changes affect insurer and consumer behavior. In October 2017, the CMS halted federal cost-sharing reduction payments to insurers, which led to premium increases in all states for 2018. Also, proposed rule changes for Association Health Plans and short-term health insurance plans could hurt the risk pool. Researchers say that it’s hard to predict how these policy changes will affect the market. For example, the approaches that some states have taken in response to the CSR payment elimination could even result in lower premiums for non-Silver plans.
Researchers surveyed individual plan consumers on and off the exchange and found that 18% say they wouldn’t have purchased insurance if there were no penalty. A substantial majority of lower-risk enrollees say they would still have purchased insurance, which changes the risk mix, according the survey published in Health Affairs. With the elimination of the individual mandate, premiums are expected to increase 7 percent per enrollee. But that’s not likely to destabilize the market since most enrollees get tax credits that would absorb the premium increases. In California, premiums for unsubsidized beneficiaries have risen an average of 8.5 percent per year from 2014 to 2018 while Covered California enrollment has remained stable and has even grown slightly.
The short-term effects from the market are likely to be smaller if many consumers are not aware that the individual mandate was eliminated or if they’re unclear about how it might affect them. Only about one-third of those surveyed in a recent Kaiser Health Tracking Poll are aware that the mandate penalty has been eliminated. Also, inertia in insurance choices could mitigate initial coverage losses.
New state-level policies could mitigate the effects of eliminating the penalty. For example, several states are considering introducing a state mandate such as the one in Massachusetts.
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