State Insurance Mandates Could Decrease Number of Uninsured, Report Finds

If all states passed their own health insurance mandates similar to ones in New Jersey and Massachusetts, close to 4 million more Americans would have health insurance, and premium costs would drop an average of nearly 12%, according to a recent report from The Commonwealth Fund and the Urban Institute.

These state-level mandates would replace the Affordable Care Act (ACA)’s penalty for not having health insurance; Congress eliminated the ACA penalty when it passed President Trump’s tax bill at the end of last year. The change takes effect in 2019.

The report said that if states replaced the federal mandate with their own version:

• Millions more people would gain health insurance as the number of uninsured would fall by 11.4%, and by 2022, there would be 7.5 million fewer uninsured Americans.
• Demand for uncompensated care would fall by $11.4 billion nationally. In Texas, uncompensated care costs would fall by $1.2 billion; in California, by $892 million; in Florida, by $747 million; and in Georgia, by $548 million.
• The impact of a premium drop would vary across states, depending on how many healthy people re-enroll in the marketplaces. The larger the share of healthy enrollees in individually purchased plans now, the greater the impact on premium rates. New Mexico would see a drop of 20%, and 6 states and the District of Columbia would see a drop of 15% or more: Colorado, Kentucky, Nevada, North Dakota, Washington, and West Virginia.
• The largest insurance gains would happen in Montana, West Virginia, North Dakota, and Kentucky, as the number of uninsured residents drops by more than 20%, as more people enroll in individually purchased plans, Medicaid, or the Children’s Health Insurance Program. In California, 389,000 people would gain coverage under a state mandate.

The report noted that one of the ACA’s main tenets was to reform how insurance markets worked by spreading risks and costs more broadly across the healthy and the sick. Doing so usually means that costs fall for those with medical needs and rise somewhat for healthy people.

The Congressional Budget Office (CBO) estimated that eliminating the individual mandate penalties would lead to an additional 3 million uninsured people in 2019, as fewer healthy people opt to enroll in nongroup insurance, leaving remaining enrollees, on average, sicker and with more expensive claims. The CBO said the elimination of the mandate would also cause premiums in the nongroup insurance market to increase by 15% between 2018 and 2019.

Other changes, such as expansion of short-term, limited-duration plans, as well as association health plans, are expected to worsen the nongroup risk pool and increase premiums. Collectively, the changes may lead to some insurers ending or limiting their participation in ACA-compliant nongroup insurance markets, the report said.

However, there are challenges to states attempting to create their own mandates, the report noted. For example, 8 states do not collect state income taxes; because new collection methods would have to be developed in order to enforce a mandate, the idea is not terribly feasible there. Nor is the idea politically feasible, not only in states that have governors and state legislatures that are hostile to the ACA, but also in ones where supporters would find it difficult to get a mandate passed.

The report was created using the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), which is designed to estimate the cost and coverage effects of proposed healthcare policy options. HIPSM is based on 2 years of the American Community Survey, and the population is aged to future years using projections from the Urban Institute’s Mapping America’s Futures program. The model is updated to reflect published Medicaid and marketplace enrollment and costs in each state.