Actuaries to Congress: Repealing individual mandate could threaten insurer solvency

If the Affordable Care Act’s individual mandate is repealed as part of a Republican tax cut plan, premiums will likely rise and insurers will exit the individual market, according to the American Academy of Actuaries.

In a letter to Senate leaders Mitch McConnell, R-Kentucky, and Chuck Schumer, D-New York, the actuaries warned that without an incentive to obtain coverage such as the mandate, healthier customers would exit the ACA exchanges, leaving a higher-risk pool which is more expensive to cover—a problem the ACA exchanges have already struggled with even with the mandate in place.

“Eliminating the mandate without implementing an alternative means to drive enrollment among healthy individuals would likely result in a deterioration of the risk pool due to lower coverage rates among lower-cost individuals,” wrote Shari Westerfield, vice president of the academy’s health practice council.

Concerns about an unbalanced risk pool have already been cited by major insurers like Humana as reasons they’re leaving the exchanges. Westerfield’s letter said without a replacement mechanism to incentivize coverage, insurers would be more likely to leave the market, casuing “severe market disruption” and fueling coverage losses among current exchange enrollees.

In the short-term, insurers could be facing heavy losses in 2018 as premiums were finalized with the expectation the mandate would remain intact.

“If the individual mandate were to be eliminated, a deterioration in the risk pool profile would result; premiums would be too low and would no longer match the costs of those covered. This could result in insurer losses and solvency concerns,” Westerfield wrote.

Senate Republicans have included repeal of the mandate in their tax cut bill as a way to pay for other provisions. The Congressional Budget Office had estimated the move would cut $338 billion from the federal deficit between 2018 and 2027 as fewer people would need the ACA’s premium support subsidies, while insurance coverage would drop by 13 million people over the same time period.

Republicans also argued repeal of the mandate is a form of tax relief on its own, as 80 percent of people paying the penalty for remaining uninsured making less than $50,000 per year.

While there were concerns that revisiting any part of this year’s ACA debate in the tax bill could doom its chances of gaining enough Republican support, one of the key swing votes, Sen. Lisa Murkowski, R-Alaska, said she’ll support repealing the mandate. 

“Repealing the individual mandate simply restores to people the freedom to choose,” Murkowski wrote in the Fairbanks Daily News-Miner. “Nothing else about the structure of the ACA would be changed.”