When Republicans passed their historic tax reform package in late 2017, they also repealed the Affordable Care Act’s penalty on the uninsured, known as the individual mandate. Now Obamacare’s supporters are waging a nationwide campaign to revive this regressive and unpopular “tax.”
Democrats in Maryland launched the first salvo when they introduced legislation that would impose a financial penalty of up to at least $695 per person on anyone who decides not to purchase health insurance. Soon after, left-leaning legislators in California, Connecticut, Hawaii, Rhode Island, Washington, Minnesota, New Jersey and Vermont, as well as the District of Columbia have started to discuss new taxes on the uninsured.
The aim of these initiatives is to discourage individuals from opting-out of insurance after Republicans eliminated Obamacare’s individual mandate through the tax overhaul bill of 2017. Many Democrats argue that Obamacare’s individual mandate “encouraged” young and healthy individuals to sign-up for coverage which created a stable risk pool for insurance companies. And because Congress repealed the mandate, millions could soon drop their insurance.
But the reality is that Obamacare’s individual mandate had little effect on people’s decisions to buy insurance. In a 2016 article for The New England Journal of Medicine, MIT economist and key Obamacare architect Jonathon Gruber examined the impacts of Obamacare’s various provisions on health coverage, including the individual mandate. He wrote, “When we assessed the mandate’s detailed provisions, which include [penalties] for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law” (Emphasis added).
The primary reason why the individual mandate didn’t work is because millions of Americans realized it makes more financial sense to pay Obamacare’s penalty than to purchase its unaffordable coverage. The law levied a penalty of $695 or 2.5 percent of personal income, whichever is higher, on every person who refused coverage. However, a typical plan available on healthcare.gov costs nearly $5,000 for the average person. In Tennessee, the average plan can cost over $7,300 per person.
But rather than address the root causes behind Obamacare’s expensive premiums, some of the healthcare law’s supporters think the answer is to make the penalties on the uninsured even higher. In Connecticut, Senate President Pro Tem, Martin Looney, D-New Haven, recently proposed a tax penalty of up to $10,000 on households that opt-out of insurance.
These taxes would impose enormous costs on the poor and disadvantaged. Data from the Internal Revenue Service discovered that nearly four out of five families that pay Obamacare’s insurance penalty make less than $50,000 per year. And two out of every five families make less than $25,000 per year.
Yet even if all of these regressive taxes go into effect, they would make zero progress towards helping the less fortunate afford health insurance.
Fortunately, some states are moving to expand health insurance to more people by making coverage less expensive. In January, Gov. Butch Otter, R-Idaho, introduced new rules that allow individuals to buy insurance plans that are exempt from Obamacare’s costly regulations. For instance, young people will finally be free to purchase discount insurance with low premiums, a practice that Obamacare expressly forbids. In addition, healthy households will be able to buy insurance for half the price of Obamacare plans.
Blue Cross of Idaho has already responded to Otter’s changes by announcing a series of new Freedom Plans that are far more affordable than Obamacare. Starting in April, Idahoans will be able to purchase health insurance for as little as $89 a month in premiums. The insurer estimates around 110,000 individuals who are currently uninsured will be able to sign-up for coverage thanks to these low-cost options.
The Gem State shows states don’t have to inflict crushing financial burdens on their poorest residents to expand coverage. Instead, they should strive to make health insurance more affordable and accessible for everyone.
Charlie Katebi is a state government relations manager at The Heartland Institute, a nonprofit, nonpartisan public policy think tank. Katebi is also a policy fellow at the Millennial Policy Center and an advocate at Young Voices
