Senate's individual mandate repeal could hurt group healthcare market

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The tax bill passed by the Senate includes a provision to repeal the Affordable Care Act’s individual mandate, which many business groups fear will cause instability in the health insurance marketplace and shift costs to employers and other stable health insurance customers.

The American Benefits Council has also said that erosion of the ACA exchanges due to healthy people leaving the market because they are no longer required to purchase coverage would make individual market coverage a less viable option for part-time workers, early retirees and individuals looking for an alternative to COBRA coverage.

And, recent analyses of Senate bills that have been touted as having the potential to offset that expected disruption indicate they would actually do little to minimize the fallout and therefore fail to ease employers' cost-shifting concerns.

One of those bills is the bipartisan health reform bill by Sens. Patty Murray (D-Wash.), and Lamar Alexander (R-Tenn.), which would fund for two years the subsidies that reduce costs for low income individuals while also giving states new flexibility on how their ACA markets are run. Sen. Susan Collins (R-Maine) — who held out on approving the legislation until the last moment — agreed to vote for the Senate’s tax reform plan on the promise that Murray-Alexander will move forward.

The Congressional Budget Office, however, estimates passage of the Murray-Alexander bill would do little to change the number of individuals who have insurance, while repeal of the mandate would translate into higher premiums along with steep rises in the number of uninsured.

Further efforts

In a letter last week to Murray, CBO Director Keith Hall said, “If legislation were enacted that incorporated both the provisions of the Bipartisan Health Care Stabilization Act and a repeal of the individual mandate, the agencies expect that the interactions among the provisions would be small; the effects on premiums and the number of people with health insurance coverage would be similar” to early estimates that the roles of the uninsured would rise by 4 million by 2019 and 13 million more by 2027 and premiums would increase 10%.

And a Rand Corp. study of a separate bill by Sens. Collins and Bill Nelson (D-Fla.) to fund waivers for states that have reinsurance programs calculated that it would increase coverage by only 1.2 million and would only reduce premiums by 3.9%. Nonetheless, Collins said Majority Leader Mitch McConnell (R-Ken.) is committed to passing her legislation “by the end of the year.”

Another healthcare provision offered by Collins and included in the Senate legislation would enhance the tax deduction for people with high medical expenses by reducing the deduction threshold to 7.5% of income from 10.5%. The bill that the House approved last month would eliminate that deduction entirely.

Also see: "Senate bill make make retirement plans less attractive for some employers."

“Lowering the threshold will provide relief for those experiencing particularly high healthcare costs, including seniors and those with pre-existing conditions,” Collins said in a statement announcing her support for the Senate’s tax bill.

James Klein, president of the American Benefits Council, says the provisions would help, “but they’re certainly not going to resolve the whole issue.”
A coalition of groups representing insurance companies, doctors and hospitals earlier this month called on Congressional leaders to abandon efforts to repeal the individual mandate “unless and until Congress can enact a package of reforms to adequately assure a balanced risk pool and prevent extraordinary premium increases.”

Bloomberg contributed to this report

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Tax reform Obamacare Benefit compliance Small business Susan Collins American Benefits Council