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Indy Explains: What repealing Obamacare's individual mandate could mean for Nevada

Megan Messerly
Megan Messerly
CongressHealth CareIndy ExplainersState Government

The Senate might pass a major tax overhaul and repeal a major portion of Obamacare soon after Thanksgiving — two major political victories for conservatives in the upper chamber — if Republicans have their way.

After unsuccessful pushes to repeal and replace the Affordable Care Act over the summer and early fall, Congress turned to the thorny, but somewhat politically safer topic of reforming the nation’s tax code, with the majority party looking for some sort of a win to take home to their conservative constituents over the holidays. But then, this week, Senate Republicans announced that they would include a repeal of the individual mandate, one of the three legs upon which the federal health-care law stands, in their tax reform bill.

The Senate voted down its version of a repeal-and-replace proposal in July. In short order, it also voted down a clean repeal of the Affordable Care Act and a so-called “skinny repeal” that would have removed the teeth from the individual mandate, along with a couple of other provisions. A last-ditch effort co-sponsored by Republican Sen. Dean Heller to turn all federal Obamacare subsidies and Medicaid expansion dollars into a block grant to be awarded to states failed to garner enough support among conservatives to bother bringing it to the floor in September.

So after months of unsuccessful efforts to get rid of any portion of the Affordable Care Act, why would Republicans drag a difficult issue like health care into an already difficult, extremely nuanced conversation over tax reform?

Under the budget reconciliation rules that Senate Republicans are using to advance the tax reform proposal with only 50 votes — meaning they don’t need any buy-in from Democrats as they would under the normal 60 — whatever legislation they pass cannot increase the federal deficit by more than $1.5 trillion in the next 10 years and it can’t increase the deficit at all beyond that time period.

The nonpartisan Congressional Budget Office, which is responsible for analyzing legislative impacts, has estimated that repealing the individual mandate will save the federal government $338 billion over the next 10 years — no small drop in the bucket when trying to craft a tax reform proposal that won’t increase the federal deficit by more than $1.5 trillion. But those significant budgetary savings come at an expense. The office also estimates that 13 million people will lose coverage if the individual mandate is repealed and that premiums in the individual market will increase by an additional 10 percent.

For Republicans, repealing the individual mandate while passing tax reform would be a significant win. But the question, as always, is whether there is the political will to do that with some Republican senators reluctant to jump on board with the proposal, saying health-care reform should be a separate conversation from tax policy.

A brief history of the individual mandate

The individual mandate is one of three key parts of the Affordable Care Act, in addition to ending preexisting conditions and providing government subsidies that help make insurance affordable for low- to middle-income individuals. The mandate’s responsibility is ensuring the insurance market has a robust, diverse risk pool.

Without a requirement to purchase health insurance, younger, healthier people might opt to take their chances and forego insurance coverage, hoping for the best, leaving only older, sicker people left to be covered by insurance companies. The end result: Higher insurance premiums to cover a more risky population that could end up pricing people out of the market.

On the flip side, some argue that deciding whether to purchase health insurance is a personal choice, and healthier Americans shouldn’t be required to purchase coverage that reduces prices for sicker Americans. Those who don’t purchase coverage must pay a fine of $695 or 2.5 percent of their income, whichever is larger. (There is an exemption for people who can’t afford coverage.)

In 2015, 5.4 percent of Nevadans reported penalties for not purchasing health insurance on their tax returns, paying a total of $33.5 million to the federal government, according to the Congressional Research Service. That’s higher than the national average of 4.5 percent.

The individual mandate is, far and above, the least popular portion of the Affordable Care Act. Recent polling by the Kaiser Family Foundation shows that 55 percent of Americans support the idea of eliminating the requirement to obtain health insurance or else pay a tax penalty as part of the Republican’s tax plan. (As a side note, the individual mandate began with conservatives as an alternative to a single-payer system and employer mandate being pushed by Democrats in the late 1980s and early 1990s.)

Republicans are the most supportive of repealing the individual mandate (73 percent), though 58 percent of independents also support repeal. A majority of Democrats (59 percent) oppose eliminating the individual mandate.

There’s also some uncertainty about how effective the “stick” of the individual mandate has been compared to the “carrot” of subsidies. But there’s still concern that, without the individual mandate, even more insurance companies will back out of Obamacare exchanges, saying that it’s no longer worth it financially for them to participate in the market.

The political dynamics of including repeal in tax reform

The significant savings, $338 billion to the federal government, would be reason enough for Republicans to include a repeal of the individual mandate in their tax reform bill. Being able to return home and tell voters that they repealed a significant portion of the Affordable Care Act would be an added bonus.

There’s also another reason for Republicans to include it now. The Congressional Budget Office has said that it is reevaluating the way that it estimates the effects of repealing the individual mandate, which will likely result in smaller projections both for the savings to the federal government and the number of Americans likely to lose coverage.

By including it in the tax reform proposal now, Republicans are able to capture the full $338 billion sticker price on the individual mandate now to use for other purposes, instead of using a lower, revised sticker price once the Congressional Budget Office reevaluates the proposal with its new methodology.

But there is also some political difficulty to including repeal in the tax reform bill. Some more moderate and independent voters might buy the argument from Democrats that Republicans are jeopardizing health insurance for 13 million Americans to cut corporate taxes by $1.3 trillion, roll back estate taxes for wealthy families and overall help the highest earners.

What it means for Nevada

The Republicans sitting on the Senate Finance Committee, which includes Sen. Dean Heller, unanimously supported including a repeal of the individual mandate in the tax reform proposal. Heller previously voted in favor of the so-called skinny repeal that would have repealed the individual mandate along with some other provisions of the Affordable Care Act earlier this year.

Heller’s spokeswoman did not return a request for comment specifically about Heller’s support for including a repeal of the individual mandate in the tax reform proposal. Nevada’s senior senator did, however, applaud the passage of the Senate tax reform proposal out of committee Thursday night, saying that it brings Congress “one step closer to delivering tax relief to middle-class families in Nevada” in a statement.

Nevada’s junior senator, Democrat Catherine Cortez Masto, criticized the Senate’s proposal as “yet another tax reform proposal crafted behind closed doors,” saying that she’s “not optimistic” that Republican Senate Leader Mitch McConnell can pass a tax bill that won’t raise taxes on the middle class.

A spokeswoman for Gov. Brian Sandoval, a Republican who has drifted further and further away from Heller over health-care policy over the last few months, said in a statement that staff is reviewing and analyzing the impact of repealing the individual mandate but that the governor “recognizes and believes federal tax reform is necessary and understands there will be many steps in the complex process of changing federal tax policy.” In August, Sandoval joined a bipartisan group of seven other governors urging Congress to keep the individual mandate in place.

“Finally, to prevent a rapid exit of additional carriers from the marketplace, Congress should leave the individual mandate in place until it can devise a credible replacement,” Sandoval and the other governors wrote. “The current mandate is unpopular, but for the time being it is perhaps the most important incentive for healthy people to enroll in coverage. Until Congress comes up with a better solution – or states request waivers to implement a workable alternative – the individual mandate is necessary to keep markets stable in the short term.”

Sandoval didn’t support the Affordable Care Act in its inception, but he has been a consistent force in defending some of its key provisions — including its expansion of the state-run Medicaid program — and in advocating for thoughtful, bipartisan reform to the federal health-care law. He also played an instrumental role in coaxing Centene subsidiary SilverSummit to step in and cover about 8,000 Nevadans across 14 counties who were going to have no insurance plans on the exchange available to them.

The concern among exchange officials in Nevada is that repealing the individual mandate could further destabilize the already shaky individual market, which enrolled about 89,061 during the 2016 open enrollment period. This year, Anthem and Prominence backed out of the individual market in Nevada and Aetna announced that it wouldn’t enter the market as planned after all.

“The Nevada individual market remains volatile, making planning and pricing for ACA-compliant health plans increasingly difficult due to a shrinking and deteriorating individual market, as well as continual changes and uncertainty in federal operations, rules and guidance, including cost sharing reduction subsidies and the restoration of taxes on fully insured coverage,” Anthem said in a statement at the time.

Repealing the individual mandate could shrink Nevada’s individual marketplace, one of the country’s smaller marketplaces, and particularly further jeopardize coverage in the 14 rural counties, since they cover such a small number of individuals.

“The individual mandate is the only existing incentive to drive people into the market — without it we will see further destabilization of an already fragile market,” said Heather Korbulic, director of Nevada’s health insurance exchange. “Eliminating the mandate without enacting a reform to balance the risk pool will likely result in significant premium increases, which means people will eventually get priced out of the market leading to an increase in the number of uninsured Nevadans.”


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