Republicans adding individual mandate repeal to tax bill

Republicans are adding a repeal of Obamacare’s individual mandate to their tax bill. The Washington Post reports:

The major change was discussed Tuesday by Republican senators during a closed-door lunch. They decided attach a provision to their tax cut bill that would repeal a provision of the health care law that creates penalties for Americans who don’t have health insurance.

“We’re optimistic that inserting the individual mandate repeal would be helpful,” Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday after meeting with party members during a closed-door lunch.

Republicans had up until Tuesday resisted making the change, worried that injecting health care politics would imperil the tax bill. But many of their members have supported adding the repeal, which President Trump has suggested repeatedly.

Repealing the mandate would free up more than $300 billion in government funding over the next decade, but it would also eventually lead to 13 million fewer people having health insurance, according to projections from the Congressional Budget Office.

Would the moderates in the party who effectively killed repeal this summer go along with repeal of the mandate. According to Bloomberg’s Steven Dennis, none of the usual suspects are threatening to reject it so far, but they are already making squishy noises:

Democrats are already jumping all over this:

The goal is to get the three wobbly Republicans to decide this is too radioactive and announce they will vote against the bill unless the mandate repeal is dropped. Will Democrats succeed in blocking this again? Probably but we’ll have to wait and see.

The mandate requires Americans who don’t have insurance through a spouse or their job to buy individual coverage, either through a broker or from their state or federal exchange. A penalty is applied directly to your tax bill if you fail to get insurance. However, evidence from previous enrollment patterns strongly suggests the size of the penalty was too small to motivate people who were not receiving subsidies. So long as the cost of the penalty was significantly lower than the cost of a plan, going without insurance is a risk many were willing to take.

The real question is what happens to enrollment next year if the mandate is repealed. Assuming this is passed soon (and we’ve seen the GOP fail at this several times), it could have a major impact on enrollment next year. A big drop in enrollment would mean a sicker than expected risk pool, i.e. those in serious need of medical care would stay in while younger, healthier people opt out. That could make next year another loser for insurers despite the big jump in premiums next year.

Does that mean we’re about to see a death spiral? Not exactly. So long as millions of people are getting free or nearly free insurance which is insulated by law from all future premiums increases, they will continue to take the money. So Obamacare won’t die off because of a drop in enrollment, at least not directly. What could happen is more of what we saw this year, i.e. insurers who are losing money on Obamacare (while doing great in other business areas) decide to cut their losses and get out of the program. And that increases the pressure on remaining insurers. Fairly soon you could have significant portions of the country with no insurance options. At that point, the mandate won’t matter.

Jazz Shaw Jul 06, 2022 9:01 AM ET