A bipartisan bill that would help fund out-of-pocket costs for Obamacare customers would not be enough to offset the cost effects of repealing the law's provision that requires people buy insurance or pay a fine, the American Academy of Actuaries warned Tuesday.
If Congress were to repeal the individual mandate penalties, then Obamacare's exchanges would have fewer people enrolled, and those still enrolled would be sicker. That would drive up costs, and premiums would either increase or insurers would leave the market altogether, actuaries said. Those changes would not be offset by new funding aimed at reducing these costs, they said.
The warning came in a letter to congressional negotiators who are in conference between the House and Senate to draft a final version of the Tax Cuts and Jobs Act. The Senate version of the bill includes repeal of the individual mandate penalties and the House version does not, but as many as 70 Republicans in the lower chamber support it, as does President Trump.
The actuaries group had previously made similar warnings when the Senate was considering its bill. In response to concerns about the effects of the repeal, one of the deals Sen. Susan Collins, R-Maine, brokered with congressional leaders was to have them agree to pass a bill that would help fund Obamacare's cost-sharing reduction subsidies. Trump ended the funds in October, and said they should be authorized not by the executive branch but appropriated under Congress.
Premiums may fall beginning in 2019 if Congress appropriates the funds, though states have been finding ways to charge the federal government more by only increasing premiums for certain enrollees. The result has been that some enrollees are paying less for coverage.
The American Academy of Actuaries concluded that the cost-sharing bill, known as Alexander-Murray, would be inadequate on its own. Still, the group recommended reinsurance funding as a possible alternative but did not say how much funding was needed.
"When considering this legislation, policymakers should consider the potential adverse consequences of eliminating the mandate, including increases in premiums and the number of uninsured, unless adequate alternative mechanisms or market stabilization provisions are implemented," the group wrote, citing reinsurance later in the letter.
In coming to a deal on the tax bill, Collins not only asked for the passage of Alexander-Murray, but another bill that would evenly allocate $10 billion in reinsurance funds over two years. These payments would go to insurers to help them pay for the medical costs of most expensive enrollees, and would reduce the costs of premiums for others. One estimate by Avalere Health found premiums would decrease by around 4 percent, but the estimate did not include repeal of individual mandate penalties.
The individual mandate is one of the most unpopular parts of Obamacare. Its supporters say that some impetus is needed to bring in healthier enrollees who might otherwise choose to go uninsured, but its critics say it is an example of federal overreach and that it has failed to bring about such goals.
The actuaries acknowledged in their letter that the Obamacare penalty had not worked well, writing that, "in practice, its financial penalty is usually low as a share of premiums, many individuals are exempt, and enforcement is weak." Still, the group concluded that the mandate "increases enrollment above what it would otherwise be."
They were also worried that if the individual mandate penalties were repealed, which would occur in time for tax season, then some insurers would become insolvent because they had set rates for the year based on the assumption that it would apply. Open enrollment for Obamacare ends Friday, after which federal health agencies will release data on how many customers enrolled in the plans.