King v. Burwell: How Important is Obamacare's Individual Mandate?
June 12, 2015
Later this month, the Supreme Court will likely announce its decision on King v. Burwell, the lawsuit which asserts tax credits currently being paid to health insurers in 34 to 37 states that use the federal health insurance exchange are illegal.
Now that both chambers of Congress have Republican majorities, any legislative response will surely include eliminating the individual mandate, the most unpopular feature of the law, says NCPA senior fellow John R. Graham.
- If the Supreme Court stops these tax credits, over six million people will be forced to pay the full premiums for their Obamacare policies. This will cause a crisis, which will demand a response by Congress and the president.
- Victory for King would make Obamacare policies in most of the country "unaffordable" and thereby relieve 11.1 million people of the individual mandate. Any "fix" that re-imposes the mandate would be political kryptonite for this Congress.
However, the most popular provision of the law is the prohibition against health insurers taking pre-existing conditions into account when setting premiums or scheduling benefits. Obamacare's supporters insist the two features go hand in glove. Because the law forces health insurers to accept any applicants without taking pre-existing conditions into consideration and charge everyone (except tobacco users) the same age the same premium, it must be coupled with an individual mandate.
If not coupled with a penalty (or fine or tax) for not having health insurance, people would simply wait until they get sick or injured and then buy health insurance. This leads to a so-called death spiral as health insurers increase their premiums in response to individuals' behavior. It is an impeccable theory, but it does not hold up in the real world.
Repealing Obamacare's individual mandate is a necessary feature of any "fix" Congress passes after a King v. Burwell victory. The benefits of repealing the individual mandate would be at least three times greater than the cost. This is corroborated by the CBO, which estimated repealing the individual mandate would reduce deficits by $464 billion in the ten years through 2024.
Source: John R. Graham, "King v. Burwell: How Important is Obamacare's Individual Mandate?" National Center for Policy Analysis, June 11, 2015.
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