The Impact of Repealing the Individual Mandate Penalty
(c) Dwight Nadig
At its peak, the ACA expanded coverage to 22 million people. Over half obtained coverage through expanded Medicaid; a small percentage got coverage on their parents plan. The rest obtained coverage on the public exchange. With all of that, we still have 28 million people without coverage. The hope was to see that number continue to fall over time, with the penalty for not having coverage providing momentum.
That’s changing now. The tax bill repeals the penalty for the individual mandate beginning in 2019. Whether or not the penalty was a strong impetus for people to enroll in coverage is unclear. The size of the penalty has increased annually to the point where, for many who are eligible for subsided coverage, it could actually be cheaper to buy coverage this year than to pay the penalty. That’s one reason we might have expected to see enrollment numbers rise. Another is that this year, with the elimination of funding for CSR payments, the insurance companies jacked up the price of their silver plans. This is important because the second-lowest price silver plan is what determines the premium subsidy paid by the government. With the increase in the cost of those plans, most people who qualify for a subsidy will be able to buy a bronze plan for little or no premium cost.
And yet enrollment reports suggest we will ultimately see a drop in sign-ups for 2018. With deep cuts in spending for advertisement and enrollment support services, and an enrollment period shortened by more than half, it appears the clock will run out before last year’s enrollment numbers are matched. This begs the question of whether open enrollment communications are actually more important than the penalty in getting people to sign up for an individual health plan.
What does this mean for employers? Short-term, ACA reporting is still required. Just because the individual mandate penalty goes away, does not mean employers get a reporting reprieve. Changes to ESR reporting were not possible under the Senate budget reconciliation rules used to pass this bill. Legislation to reduce reporting burdens has been introduced before in Congress, and certainly employer groups will continue to advocate for that. The IRS may also issue guidance easing reporting requirements for future years. But the 1095-C doesn’t only serve to prove an individual satisfies the individual mandate; it also reports information related to enforcement of the employer mandate, which is not eliminated by this tax law. And let’s not forget that because the penalty will still be in play for 2018, we will still have to issue 1095s thru 2018.
Longer term, this change will require even greater focus on the cost of care. Cost-shifting is a concern when the number of uninsured increases because private payers inevitably end up picking up the tab for uncompensated care. And speaking of cost-shifting, we will also need to pay close attention to what happens to Medicaid as tax revenues fall and states are given greater flexibility to manage that program. In short: Now is the time to focus on plan management strategies. You might start with my list of six action items for employers in 2018.