[I’ve been super busy this fall and unable to keep up with writing about the ACA. I’m back in the saddle and here I go again. This commentary was just published on the Commonwealth Magazine website.]
A CORE TENET of behavioral economics is that most of us are biased toward optimism. I plead guilty. Today’s Exhibit A of my optimism bias is the Republican federal tax cut legislation heading toward the desk of President Trump for his signature.
It is true that the tax cut legislation is rigged to disproportionately benefit rich corporations and wealthy individuals; it expands the federal debt by $1.5 trillion or more; it’s biased against blue states that provide better public services and education; yes, it’s the pits. And yet…
In at least two ways, this new tax cut law will present opportunities and advantages for progressives, one next year, and the other in the future when Democrats recapture control of the White House, Senate, and House of Representatives, as early as January 2021. In this column, I’ll discuss the first – the tax legislation’s repeal of the so-called “individual mandate” in the Affordable Care Act (ACA). In my next column, I’ll explain how the tax cuts may empower Democrats to do a lot of good public policy in the near future.
Here’s the first way. The tax cut legislation reduces the ACA’s tax penalties under the so-called “individual mandate” to zero. Despite repeated media reports that the law repeals the individual mandate, that’s incorrect. Straight repeal is not permitted under the Senate’s strict “budget reconciliation” rules under which the tax legislation is moving forward, but reducing the mandate’s monetary penalties to zero is kosher.
Many have predicted that disabling the individual mandate will fatally undermine the ACA. That’s also incorrect. The 13 million people – with incomes between 0-138 percent of the federal poverty line – who got covered because of the ACA’s Medicaid expansion are untouched. Also, the 9 million between 139-400% of poverty who receive private health insurance subsidies will be largely unaffected.
Those who will be harmed are the 7 million individuals (and their family members) with incomes over four times the poverty level who purchase individual health insurance and are ineligible for subsidies or affordability protections under the ACA. Because of the mandate’s defanging, these folks will see dramatic premium hikes, 10 percent or higher – and it could be much worse.
The Congressional Budget Office estimates that, by 2026, 13 million people will lose coverage because of this change, 9 million in the short term. Thirteen million is the high water mark of loss projections, with some suggesting losses between 3-5 million. What’s undeniable is that the unsubsidized 400 percent-plus population will see huge premium bumps as healthy and younger insured persons drop out of the health insurance market, triggering an insurance “death spiral” for that segment of the health insurance market.
There’s sad irony in this move by Republicans. For the past 7½ years, this unsubsidized 400 percent-plus group has been the favored poster child for Republican criticisms of the ACA. An earlier move this fall by President Trump that ended federal cost sharing reductions payments to insurers for individuals and families with incomes 139-250 percent of poverty primarily hurt the 400 percent-plus group. So, in the past three months, Trump and Congressional Republicans have taken two serious steps against the ACA that primarily hurt the one group they claimed to care about the most.
But here’s a bigger irony. By a country mile, the individual mandate is the least popular part of the ACA. Take the mandate off the table, as Republicans are now doing, and all that’s left in the ACA are reforms that Americans strongly favor, such as Medicaid expansion, private insurance subsidies, elimination of pre-existing condition exclusions and medical underwriting, guaranteed coverage of critical services such as pharmaceuticals, and lots more.
Recently, Trump, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan have indicated their intention to launch yet another “repeal and replace” push against the ACA next year. Yet if Republicans take one more run at repealing the ACA in 2018, by defanging the individual mandate they just eliminated their most potent – and perhaps only – political weapon. And if Democrats regain political control and reinstate this provision in the future to stabilize the individual health insurance market, they need only to reactivate the ACA penalties using the same budget reconciliation process the Republicans are using today.
Despite Republicans’ repeated assaults, including the mandate penalty change and cancellation of cost sharing reduction payments, the ACA stands tall. Its wounds are far from fatal. In spite of determined efforts by the Trump administration to sabotage the open enrollment process, millions of Americans needing health insurance have signed up and demonstrated the durability of this model.
And there’s a bigger way that this tax cut legislation may provide yet another advantage for Democrats to sustain and improve US health reform. I’ll describe that in my next column.
John E. McDonough is a professor of practice at the Harvard TH Chan School of Public Health in Boston.