Kaiser Analysis: For Many, Health Coverage Costs Less Than Individual Mandate Penalty

For Americans weighing the cost of buying health coverage versus going without, the changing math of 2018 makes the choice easier: 54% of those uninsured and eligible for plans under the Affordable Care Act (ACA) could buy one for less than the penalty they’d pay to go without coverage.

What’s more, among the 5.8 million in this group, about 4.5 million—or 42% of all Americans eligible for ACA coverage who lack it today—could get a bronze plan for free, once they take income-related premium tax credits, according to a new analysis from the Kaiser Family Foundation.

How could this be? It goes back to President Donald Trump’s decision to cancel cost-sharing reductions, the payments to insurers that help them meet ACA requirements for offering low-cost coverage to the poorest Americans.

Trump’s move, coming late as it did on October 12, forced state regulators to load the effects of the lost subsidy onto the cost of silver plans, driving up their cost for Americans who don’t qualify for premium tax credits. Because these credits are calculated as a percentage of premium costs, rising premiums meant rising credits, too. This has led to some oddities in the premiums, with some gold plans with better coverage costing less than some silver plans, along with the quirk of some bronze plans being essentially free for those at the lowest income levels.

The flip side, of course, is that those at the other end of the income scale are being charged much more. For these consumers, the cost-benefit analysis of going without coverage could look quite different. Only 2% of uninsured, market-eligible consumers who don’t qualify for a subsidy can pay less for ACA coverage than they would owe for a penalty next year, the Kaiser analysis found.

The ACA’s many elements—subsidized coverage, Medicaid expansion, and the threat of penalties if one lacks coverage—combined to drive uninsured levels to record lows in 2016. However, a recent Gallup survey found that uninsured levels crept back up over the past year, rising to 12.3% in the third quarter of 2017, the highest it had been since it was 12.9% in the fourth quarter of 2014.

The future of the individual mandate is uncertain. There is speculation it could be canceled as part of a tax plan being weighed in Congress. A report from the Congressional Budget Office released this week found that canceling the mandate would reduce the federal deficit by about $338 billion from 2018 to 2027, but also cause 13 million people to lose coverage and premiums to rise 10% in most years through 2027.

However, there are signs that Americans are aware of this year’s shorter sign-up window for ACA coverage or that the quirks in the premium schedules are attracting lower-income consumers. The Hill reports that 600,000 people signed up for ACA coverage in the first 4 days of open enrollment. This occurred despite HHS cuts to budgets for advertising and navigators; instead, many private insurers have deployed their own teams of helpers to aid consumers.

Open enrollment is only 6 weeks long this year, ending December 15, 2017.