Mitigating the Loss of the Individual Mandate: State Based Health Insurance Mandates

In December 2017, the federal administration’s tax bill – the Tax Cuts and Jobs Act, phased out the individual mandate requirements, with the penalty for failing to have qualified insurance eliminated starting in 2019. For 2018, the mandate remains, with the penalty set at $695 per adult or 2.5% of household income, whichever is higher.  The individual mandate is cited as one of the tenants of the success of the Affordable Care Act. In order to ensure a healthy risk pool, participation of as many individuals as possible was key. Many states, in particular those with very low uninsured rates are seeking ways to ensure continued participation, including studying the impact of the loss of the individual mandate, and establishment of a state based tax penalty for failing to have insurance coverage. One state that currently has legislation pending, with interest and support from the Governor’s office, is Vermont.

The Vermont House recently passed H. 696An Act relating to establishing a State individual mandate. The bill has gathered support from the Administration, with the Governor seeking to take time to understand the impact and how best to support an individual mandate within the existing state agency framework. The Green Mountain Care Board (GMCB) and the Department of Financial Regulation (DFR) recently released a study commissioned to examine the impact of the loss of the individual mandate on the merged market in Vermont- including enrollment impact and the cost of health insurance. The study finds the likely premium impact will be an increase of 1.4% to 2.6%, with an estimated close to 4,000 individuals likely to drop insurance when no longer mandated to have qualified health insurance, bringing the uninsured rate from 3.7% to 4.3%.

States continue to explore ways to stabilize their markets, contain premium costs, and ensure access for individuals to high quality, affordable health care. Whether a state based individual mandate will work in a particular state depends on the market, premium impact and other state specific factors- much like the decision to expand Medicaid or not. As a last thought for states, we include a recent issue brief from the Wake Forest, Health Law and Policy Program that has some up to date impact and analysis on Medicaid expansion, especially for those states still the midst of the analysis of whether or not to expand.

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