CHA News Article

New Study Examines Impact of Eliminating Individual Mandate Penalty

Health Affairs last week published a Harvard Medical School study measuring the potential impact of the federal government’s elimination of the individual mandate penalty. The Congressional Budget Office and the Joint Committee on Taxation estimated that, within one year, its elimination will leave 4 million fewer individuals insured nationwide. However, proponents of the repeal suggested the methodology used to arrive at that estimate overstates the importance of the mandate for coverage.

In its study, Harvard researchers asked a random sample of adult enrollees in the 2017 California individual insurance market about the extent to which eliminating the mandate penalties might have altered their decision to purchase insurance. Key findings include:

  • 18 percent of the enrollees said they would not have purchased insurance in 2017 if the penalty had not existed, indicating a potential result of 378,000 fewer Californians with coverage in the individual market.
  • Enrollees with the lowest levels of predictable medical spending (healthier individuals) were more likely to say they would not have purchased insurance in 2017 in the absence of a penalty. 
  • Harvard Medical School estimates that, due to elimination of the individual mandate penalty, premiums could increase by an additional 7 percent in California.

In response to the report findings, Covered California announced:

  • While California will continue to have a stable individual market, as well as reserves and flexibility to adjust, the impact is still significant for consumers.
  • If 378,000 Californians decide to forgo insurance, about 60,000 of them are likely to need medical care that could cost them more than $10,000. This speaks to the value of health insurance coverage, and those who leave the insurance market could find themselves at risk of high medical bills and debt.
  • With a less healthy consumer pool, Californians in the individual market could face premium increases for 2019 of 12 to 16 percent, with the biggest driver being the elimination of the individual mandate penalty. While consumers who receive financial assistance to pay for their coverage would be shielded from rate increases, unsubsidized consumers would bear the full cost of the increase or risk being priced out of coverage.

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