ACA funding bills would cancel out hikes from repealing individual mandate

The repeal of the Affordable Care Act’s individual mandate has been projected to cause insurance premiums to rise by an average of 10 percent through 2027. Those hikes would be mitigated, however, if Congress funded the ACA’s cost-sharing reduction subsidies and a $10 billion, two-year reinsurance program, according to an analysis from Avalere.

Sen. Susan Collins, R-Maine, has been pushing for the reinsurance funding after voting for the Senate Republicans’ tax cut plan, which includes a repeal of the mandate penalizing people who choose not to buy health insurance. She has said Senate Majority Leader Mitch McConnell will support her bill and the funding for the subsidies, known as CSRs, though House Speaker Paul Ryan, R-Wisconsin, hasn’t made the same commitment.

While the Congressional Budget Office (CBO) said the CSRs alone wouldn’t stop premiums from rising or from 13 million more people becoming uninsured by 2027, Avalere found that factoring in the reinsurance funding would increase insurance enrollment by 1.3 million and lower premiums by 18 percent compared to current law, which assumes the individual mandate wouldn’t be repealed.

“Together, funding for reinsurance and paying the cost-sharing reductions would significantly reduce premiums,” Chris Sloan, senior manager at Avalere, said in a statement. “However, those effects only continue as long as the federal funding keeps flowing.”

Avalere’s analysis actually credited much of the projected gains in insurance coverage and reduced premiums to the CSRs. For example, if $5 billion in reinsurance was available in 2019, the analysis said premiums would be reduced by 4 percent and 180,000 more people would be insured compared to current law. Adding in CSRs drove up the premium reductions by 14 percentage points.

Additionally, the analysis said more reinsurance funding would mean lower premiums and bigger enrollment gains. If the CSRs were funded and $15 in reinsurance was available, premiums would fall by 24 percent and 1.75 million more people would enroll in insurance coverage compared to current law.

“While funding reinsurance and cost-sharing reductions would help mitigate the impact of mandate repeal, eliminating the requirement to purchase coverage would create additional uncertainty in the market,” said Elizabeth Carpenter, senior vice president at Avalere. “As a result, it is important not to overlook the negative impact of repealing the individual mandate on long-term market stability.”

While the CBO said the individual insurance market would be stable without the mandate, it could have bigger financial impacts on the healthcare industry. The American Academy of Actuaries warned it could deteriorate the market’s risk pool, driving away insurers and fueling coverage losses in the long-term. In the short-term, it may mean heavy losses for insurers in 2018, as rates were set with the expectation the mandate should stay in place.

Additional short-term pressure may be felt by providers, according to Fitch Ratings, because repealing the mandate and the resulting increase in uninsured would likely lead to additional uncompensated care costs for hospitals.