Many people have expressed concerns that the mandate portion of the ACA isn’t strong enough to balance out the expected sharp increase in premiums that will accompany guaranteed issue coverage starting next year. Open enrollment windows are a possibility, but I’m not the only person who has noted that compressing each year’s applications into a few weeks each fall might be less than ideal. There are other ideas being discussed in response to the call for comments from HHS last November, although it’s hard to know at this point whether any of them will end up being included along with the basic tax penalty that is currently set up to enforce the mandate. That article also mentions that “The health insurers have a vested interest in asking for the extra measures, of course. They want as many customers as possible” – which I find interesting. I would say that all of us who purchase individual health insurance have a vested interest in there being as many other people in the pool as possible, as quickly as possible after guaranteed issue goes into effect. Otherwise, the impact on our premiums is going to be considerable.
Remember, the MLR has already been in effect for two years. Individual and small group health insurance carriers are already spending at least 80 cents from every premium dollar on medical services (if not, insureds are getting rebate checks). That will continue to be the case next year, but the guaranteed issue provision will likely mean that individual premiums might start to look more like small group premiums. And the more healthy people who ignore the mandate (and choose to pay a $95 penalty instead), the more premiums will increase in order to cover claims expenses for people who need care.
I have seen articles claiming that the premium subsidies will be enough to make people purchase health insurance, and that there’s no need for sticks when we have a carrot like that. The Kaiser Family Foundation has a very good interactive subsidy calculator that you can use to get a rough idea of what your coverage might cost next year (averages only) and what your subsidy would be, based on your current income. I entered data for a 28 year old single adult earning $30,000, with a medium regional cost factor. The calculator predicted a total premium of $3,391 for the year, and a subsidy of $882. That leaves $2,509 that our hypothetical person would need to pay in premiums. The alternative, of course, is a $95 penalty (or 1% of adjusted gross income above the filing threshold, which was $9,750 in 2012). If the person has been uninsured until now and feels comfortable with that status, the out-of-pocket cost to purchase health insurance is about 25 times the cost of the penalty. And yet, that healthy 28 year old is exactly the sort of person that is needed in the health insurance pools.
Late enrollment fees (similar to what Medicare uses) might be a good tool to help enforce the mandate, especially if they were to be combined with open enrollment windows that are staggered throughout the year to coincide with each person’s current policy renewal date. I think that by 2016, when the penalty for not having health insurance increases to $695 per uninsured person, the disparity between the cost of coverage and the penalty will be less significant and there will be fewer people who opt out of the health insurance system. But until then, it might be a very good idea to have additional provisions the help increase the number of people enrolling in health insurance plans.