Consequences of Eliminating the ACA's Individual Mandate

Many proposals to modify the Affordable Care Act include eliminating the individual mandate, which remains unpopular, but doing so would have significant effects, according to a RAND analysis.

The Affordable Care Act (ACA)'s provision that requires most American obtain health insurance or pay a penalty, known as the individual mandate, remains unpopular with 64% of respondents to a Kaiser Family Foundation survey saying they view the provision unfavorably. Many proposals to modify the ACA would eliminate the individual mandate.

A new blog post from RAND examines the impact of removing the requirement to buy health insurance, which is a critical component to schieving the law's goal of near-universal health coverage.

"We find that repealing the requirement would significantly reduce health insurance enrollment and cause individual market premiums to rise," wrote Evan Saltzman, a project associate at RAND, and Christine Eibner, a senior economist at the RAND Corporation.

They explain that the purpose of the individual mandate is to provide an incentive for young and healthy people to enroll, which offsets the cost of older or less healthy enrollees. They used RAND's COMPARE model and concluded that based on enrollment prior to the ACA and other facotrs, 12.3 million fewer people would have insurance coverage if the individual mandate were repealed.

Half of those people who would drop coverage without the requirement would come from individual market plans and the remainder would drop coverage acquired through either their employer or Medicaid and the Children's Health Insurance Program. The effect of this drop in enrollment would cause premiums to increase by 8% in 2017 with large losses among the young and the healthy. As a result of the premium increase, Saltzman and Eibner estimate another 2.1 million people would disenroll from the individual market.

"Policymakers seeking to eliminate the individual mandate may need to develop alternative mechanisms for managing costs if they want to avoid these adverse effects," they wrote.