Later today, the Senate is scheduled to hold its initial vote on repeal of the Affordable Care Act, although nobody, including the senators themselves, know which bill will be up for a final vote. Reportedly the options for consideration include a previously-unseen “skinny” version of ACA repeal that would only include a repeal of the coverage mandates and the medical device tax. But this skinny repeal bill, if passed, would still have negative effects on health insurance coverage. It would also discourage issuer participation in the individual market and increase the average marketplace premium by $1,238 next year.
The Congressional Budget Office (CBO) has estimated that repeal of the individual mandate would result in 15 million fewer Americans having health insurance a decade from now. By 2026, about 15 percent of the nonelderly population, or 43 million Americans, would be uninsured.
Mandate repeal would affect the individual market enrollment in two ways. First, in the absence of a mandate, some younger and healthier individuals may decide to forgo individual market coverage. This phenomenon, known as adverse selection, would cause the average cost among enrollees remaining in the individual market to rise. In turn, issuers would need to raise rates. The CBO projects that premiums in the individual market would increase by “roughly 20 percent relative to premiums under current law.” Second, because these higher premium levels would not be affordable to some enrollees, more people would be forced to drop their coverage and become uninsured.
The Center for American Progress estimates that a 20 percent increase in individual market premiums next year would mean that the average premium in insurance marketplace would be about $1,238 higher than it would otherwise be under current law. Consumers who were not subsidized, including those who buy their coverage outside the marketplaces, would pay the full premium increase from mandate repeal. For consumers eligible for subsidies, any 2018 premium increase would largely be mitigated by increased premium tax credits, and therefore borne by taxpayers.
Furthermore, the passage of skinny repeal would immediately destabilize the individual market, driving up premiums and leading insurers to exit the market. Even if the House and Senate bills went to a conference committee and a final bill was not passed for some time, the legislation would still immediately destabilize the individual market because the deadlines for insurers to set final 2018 rates are a few weeks away. Issuers would not know the final form of the bill until after the filing deadline; they would have to either increase 2018 premiums now in anticipation of the repeal the mandate or simply withdraw from the individual market altogether. Either action would have catastrophic effects on the individual market and its consumers.
Finally, although a skinny repeal bill would not include the devastating cuts to Medicaid, gutting of protections for people with pre-existing conditions, and reductions in financial assistance found in the House’s repeal bill and previous Senate versions, there is nothing to stop House Speaker Paul Ryan (R-WI) and Senate Majority Leader Mitch McConnell (R-KY) from adding back these harmful provisions if the bill goes to a conference committee. Notably, a final conference bill would be subject only to an up-or-down vote and could not be amended.
To estimate what premiums would be next year, we used information on the 2017 average premium and inflated it to 2018 rates. Among states that reported average 2017 premiums to CMS, the average was $471 per month, or $5,652 annually. Under implementation of the ACA, including continued payment of cost-sharing reductions and enforcement of the individual mandate, premium increases next year would reflect mostly increases in medical trend. The consultancy Oliver Wyman predicts that premiums should rise about 8 to 11 percent in 2018. We used the midpoint of this prediction, 9.5 percent, to estimate the 2018 premium.
To apply the CBO’s estimate that premiums would increase by 20 percent relative to current law, we applied that increase to expected 2018 premiums under the ACA implementation. We estimate the average marketplace premium without the mandate would be $7,427 next year, $1,238 higher than it would otherwise be.
Emily R. Gee is the health economist for the Health Policy team at the Center for American Progress. Thomas Huelskoetter is the policy analyst for the Health Policy team at American Progress.