Killing the ACA Tax Will Make it Easier to Restore Insurer Subsidies
The House is poised to pass tax reform on 11-17-17; the Senate draft includes a repeal of ACA’s individual mandate. Is this an attempt to deny Americans health insurance? Some want to repeal the mandate that fines Americans who don’t buy health insurance and become part of the tax initiative under review. The hope is doing so will ensure that tax reform complies with the dictate: no deficits outside a 10-year budget window.
The individual mandate would see a savings of $338B over 10 years that will be reflected in tax relief for individuals. The savings continuing in year 11 and beyond, would see a 20% corporate rate becoming permanent, likely a sound tax policy and business investment. This notion is reinforced by the Congressional Budget Office (CBO) now conceding that previous estimates were imprecise since it’s difficult to predict how insurers, individuals and other parties will respond. The proof thus far sees that ACA enrollment is 60% below what CBO had originally predicted.
Going forward with elimination of the ACA tax , it’s expected that some Americans will decide not to buy insurance if they aren’t hit with a tax … which is their choice. No other ACA rule or mandate would be changed, and no benefit formula would be altered. Anyone who still wants an ACA policy could still buy it.
Statistics show that millions of people haven’t signed up, even with the mandate, because premiums are rising and doctor networks have grown more restrictive. More than six million American households in 2015 decided that ACA products weren’t worth the cost even though they had to pay the tax. Nearly eight in 10 of those people earned less than $50,000.
People in income brackets above 400% of the poverty line have been hit hard: couples earning about $65,000—are forced to buy a product they often can’t afford. And, they’re not eligible for tax credits or cost-sharing payments to mitigate the expense. If they don’t buy insurance their mandate fine can be $1,390.
These factors have prompted the CBO to revisit the accuracy of its mandate forecasts. CBO says in its most recent estimate it has examined methods for estimating the mandate repeal. New thinking indicates that the mandate does not encourage people to buy health insurance.
Either way, tax credits for low-income folks expand with premium increases, so the poor don’t suffer even if premiums rise on the exchanges.
A repeal of the mandate may encourage the bipartisan deal to restore insurer subsidies in exchange for concessions on state flexibility. The debate is about giving Americans the freedom to choose continues.
WSJ – Nov. 15, 2017