I’ve been discussing arguments about the role of the individual mandate, how its possible absence might affect participation in the individual insurance market, and whether it is needed to prevent an insurance death spiral. A related point is that the individual mandate will actually have almost no impact on what a majority of people using the new exchanges would pay for health insurance.
For most people using the new exchanges, their cost of insurance will be determined by the affordable tax credits. According to the CBO’s projections, roughly 60 percent of people getting insurance in the non-group market will qualify for affordability tax credits. Given these subsidies, what these individuals are required to pay to get health insurance will be almost exclusively based on their income and not affected by the technical cost of premiums. It doesn’t matter whether the premiums are $5,000, $15,000 or $50,000 a year; if you make less than 400% of the Federal Poverty Line (FPL), what it costs you to buy a “silver plan” is set at a percentage of your income.
When people point to the CBO or Lewin Group or Urban Institute projections that dropping the mandate will increase average “premiums” by 10-20%, they don’t always mention that for the majority people in the non-group market, their individual costs aren’t determined by what the premiums are.
A Rand Study found that average non-group premiums would increase by 10-20% without the mandate, but what the majority of individuals would actually pay for insurance would go up by only about 2.4%. It also found that because of the design of the affordability credits many people under 400% of FPL would see basically no change in what they pay, with or without a mandate.
If the Court strikes down just the mandate, it could result in fewer people choosing to sign up for insurance and would likely increase the average amount the government would spend per new enrollee on affordable tax cuts, but it would have relatively little impact on what average people in the group market or non-group market or on Medicaid would need to pay to buy insurance.
This mandate reduces the average cost per new enrollee for the government, but it doesn’t really do anything to make insurance much cheaper for the actual new enrollees. The presence or absence of just the individual mandate would do very little to change how affordable the law will make health insurance for the people who want to sign up.