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6 ACA individual mandate replacement ideas

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A critic of the Affordable Care Act says the ACA individual coverage mandate works especially poorly and ought to be replaced.

Thomas Miller, a senior fellow at the Washington-based American Enterprise Institute, talked about alternatives to the mandate today in Washington during a hearing organized by the House Ways & Means oversight subcommittee. The subcommittee streamed the hearing live on the web.

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Drafters of the Patient Protection and Affordable Care Act of 2010, one of the two laws in the ACA package, included the penalty provision in an effort to increase the number of relatively young, healthy people who pay for major medical coverage. The coverage mandate, officially known as the individual shared responsibility provision, was supposed to increase health insurer revenue, and decrease the average level of claims per enrollee.

For the people affected, the tax amounted to 1 percent of modified adjusted gross income for 2014, 2 percent of MAGI for 2015, and 2.5 percent of MAGI for 2016.

In the real world, the average individual mandate penalty paid increased to $452 for 2015, from $204 for 2014, according to a National Taxpayer Advocate report.

Miller testified at the hearing that the mandate is the most unpopular well-known ACA provision. Only 35 percent of the U.S. adults who participated in the Kaiser Health Tracking Poll in November approve of the individual mandate, he said.

Congress itself has responded to the unpopularity of the mandate, and members’ own qualms about the mandate, by limiting who has to pay the mandate, and how the Internal Revenue Service can enforce the mandate, Miller said.

Congress created exemptions for illegal immigrants, foreign nationals, people with religious exemptions, and people who find coverage unaffordable, and regulators later added exemptions for people with excuses such as the recent death of a family member, or facing evictions, Miller said.

The IRS can deduct the penalties owed from tax refunds, but it cannot impose other penalties or prosecute non-payers in criminal court, and it cannot use liens to collect unpaid penalties, Miller said.

Jonathan Gruber, an economist who supports the ACA, found that the penalty had little effect on the number of people with coverage in 2014, Miller said.

Gruber found that the ACA Medicaid coverage expansion program and the ACA exchange plan premium subsidy program accounted for most of the coverage gains, Miller added.

Miller suggested six possible ACA individual mandate alternatives. 

ACA individual mandate alternatives

1. Expand the Health Insurance Portability and Accountability Act provision, which once helped people who maintained “continuous coverage” get access to health insurance.

The 1996 provision applied only to people who had group health coverage and certain other types of coverage, not users of individual major medical policies. But it was supposed to guarantee that the people who met HIPAA continuous coverage requirements could get some kind of replacement coverage.

Congress could improve the HIPAA provision and make it available to people who are switching between individual policies as well as to people who are switching from group plans to individual coverage, Miller said.

2. Add surcharges to the health insurance premiums of people who fail to have health coverage and then buy coverage.

This is the system that the Medicare Part B physician services program and Medicare Part D prescription drug program use, Miller said.

3. Tighten eligibility requirements and toughen enforcement outside the existing Affordable Care Act open enrollment period.

The ACA lets anyone buy health coverage during an open enrollment period that runs from Nov. 1 through Jan. 31. From Feb. 1 through Oct. 31, people who want to get individual major medical coverage must show they have what the government classifies as a good excuse, such as a move to a new market, for buying coverage. The Obama administration began tightening SEP system enforcement last year and was developing efforts to further tighten enforcement this fall.

4. Enroll uninsured people in minimum qualified coverage by default.

Miller said he thinks people should get notice that they will be enrolled in coverage and have a chance to opt out. Some 401(k) plan sponsors now use that strategy to maximize retirement plan participation rates.

5. Provide bigger premium subsidies.

That might cost the government more, but it would emulate the strategy typical employer group plans use to get employees covered, Miller said.

6. Give insurers the incentives and the freedom to offer cheaper, more attractive coverage that uninsured people want to buy.


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